The Commercial Leading Indicator for Brokerage Activity(1) slipped 0.4% to an index of 120.1 in the fourth quarter from a reading of 120.6 in the third quarter, but remains 0.1 above the fourth quarter of 2006 when it stood at 119.9.
This is the second straight quarterly dip after reaching a record of 120.7 in the second quarter of 2007. The index showed nine consecutive quarterly gains prior to these declines; NAR’s track of the index dates back to 1990.
Lawrence Yun, NAR chief economist, said the latest index suggests reduced business opportunities for commercial real estate practitioners in the months ahead. “The decline in the index implies that commercial activity, as measured by net absorption and the completion of new commercial buildings, is likely to contract moderately over the next six to nine months, which is consistent with an expectation for slower overall economic expansion in upcoming quarters,” Yun says.
Rising unemployment insurance claims and falling durable goods shipments were the key factors in lowering the CLI, but a weaker rate of return on investment as measured by the NAREIT Price Index was also a factor. The only positive contributors to the index were growth in wholesale and retail trade, and rising personal income.
