The DAI measures changes in the real estate development pipeline. Brian Gordon, a principal with Applied Analysis, which maintains the DIA, tells GlobeSt.com that the largest contributors to the decline were the shrinking number of Multiple Species Habitat Conservation Plan acres being developed and housing units being permitted.
MSHCP tracks the total number of acres for which surface disturbance permits have been issued. The 1,451 acres disturbed in the fourth quarter is up slightly from the third quarter's 1,408 but remains 44% below the number of acres disturbed in the fourth quarter of 2005. As for housing permits, the fourth quarter total was off 42.1% or 1,040 units compared to the fourth quarter of 2005.
"The slowing amount of development activity can be attributed to a softer housing market, a shrinking amount of developable acreage and the higher cost of vacant land," Gordon says. "Although the DAI remains high, we anticipate this number to continue to fall through the first half of 2007."
Shoring up the Index was an increase in office and retail inventories on both a quarter-over-quarter and year-over-year basis. Office inventory during the fourth quarter totaled 7.4 million sf, an increase of 9.2% over the previous quarter and 18.6% higher than the same year-earlier period. Retail inventory in the fourth quarter totaled 13.7 million sf, an 18.6% increase over the previous quarter and 148% higher than the same year-earlier period. Industrial inventory totaled 944,000 sf in the fourth quarter, up 2% from the third quarter and up 4.9% from the same year-earlier period.
With regard to the housing market, Gordon tells GlobeSt.com that "a significant number of investors that bought residential properties as investments over the past couple of years have decided to realize their gains; the resale market is at an all-time high. Until those units are absorbed over time homebuilders are being cautious with the amount of units they put on the market because they are competing with that resale market."
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