Commercial Real Estate Activity Continues to Slide

A sustained lack of credit and the economic slump will depress the commercial real estate market this year, according to a forward-looking index and forecast for the commercial real estate sectors published by the National Association of Realtors (NAR).

“The credit crunch has especially hammered down some components of NAR’s commercial leading indicator,” says Lawrence Yun, NAR chief economist. “A lack of commercial credit is a serious threat to the overall economy. The Federal Reserve needs to use the Term Asset-Backed Securities Loan Facility (TALF) to provide liquidity and support for commercial mortgage-backed securities.”

The Commercial Leading Indicator for Brokerage Activity fell 6.0 percent to an index of 109.2 in the fourth quarter from a downwardly revised reading of 116.1 in the third quarter, and is 9.1 percent lower than an index of 120.1 in the fourth quarter of 2007. NAR’s track of the commercial leading indicator dates back to 1990.

The slowing index means commercial real estate activity, as measured by net absorption and the completion of new commercial buildings, is likely to weaken further over the next six to nine months.

The Society of Industrial and Office Realtors, in its SIOR Commercial Real Estate Index, a separate attitudinal survey of 644 local market experts, also expects a lower level of business activity in upcoming quarters. Ninety percent of respondents indicate leasing activity in their market is down and vacancy rates are generally higher. The SIOR index has declined for eight consecutive quarters and is 58.5 percentage points below the 100 point criteria that represents a balanced marketplace.

For more information, go to: www.realtor.org and www.sior.com.