A forward-looking index for the commercial real estate market recorded its ninth consecutive improvement in the second quarter, the National Association of Realtors reported today.

The Commercial Leading Indicator for Brokerage Activity rose 0.5 percent to an index of 120.7 in the second quarter, the highest on record, from a downwardly revised reading of 120.1 in the first quarter, and is 1.1 percent higher than the second quarter of 2006 when it stood at 119.7. NAR’s track of the index dates back to 1990.

Lawrence Yun, NAR senior economist, said in a statement that the commercial sectors are benefiting most from rises in industrial production, shipments of durable goods and wholesale trade. “Despite some signs of slower overall economic expansion, the rise in the index means net absorption of space in the industrial and office sectors is likely to expand over the next six to nine months,” he said. “In addition, an improvement in returns on investment implies healthy rent increases for commercial property owners.”

Positive movements in the index components more than offset a fall in the National Association of Real Estate Investment Trusts price index. The net gain in NAR’s index also indicates modestly higher completions of overall office, warehouse, retail and lodging structures.

“In short, the latest data suggests improved business opportunities for commercial real estate practitioners in the months ahead,” Yun said.

Net absorption in the office and industrial sectors in the fourth quarter of 2007 is expected to be 30 million to 40 million square feet, with about $365 billion to $375 billion in new completed commercial construction activity, compared with $343 billion of new construction reported in the second quarter of this year.

The rise in the commercial leading indicator also implies that commercial real estate practitioners could expect leasing and sales activity in the fourth quarter of this year to be about 1.1 percent higher than the fourth quarter of 2006.

The commercial leading indicator is a tool to assess market behavior in the major commercial real estate sectors. The index incorporates 13 variables that reflect future commercial real estate activity, weighted appropriately to produce a single indicator of future market performance, and is designed to provide early signals of turning points between expansions and slowdowns in commercial real estate.

The 13 series in the index are industrial production, the REIT (real estate investment trust) price index, NCREIF (National Council of Real Estate Investment Fiduciaries) total return, personal income minus transfer payments, jobs in financial activities, jobs in professional business service, jobs in temporary help, jobs in retail trade, jobs in wholesale trade, initial claims for unemployment insurance, manufacturers’ durable goods shipment, wholesale merchant sales, and retail sales and food service.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription