Commercial Real Estate Index
SIOR Index – Commercial Markets
Continue Recovery as Economy Slows
in First Quarter 2011
Lawrence Yun is Senior Vice President and Chief
Economist at the NATIONAL ASSOCIATION OF REALTORS®. He
writes regular columns on real estate market trends,
creates NAR’s forecasts, and participates in many
economic forecasting panels, including Blue Chip and
the Harvard University Industrial Economist Council. He
received his undergraduate degree from Purdue University
and earned his Ph.D. from the University of Maryland.
George Ratiu is an Economist with the NATIONAL ASSOCIATION
OF REALTORS® in Washington, DC. He specializes in
mortgage finance, foreclosures, and commercial real
estate. Mr. Ratiu produces NAR’s Commercial Real
Estate Outlook, which provides quarterly forecasts
for the office, industrial, retail, and multi-family
sectors. He received his undergraduate degree from
Campbellsville University and earned his graduate
degree in Economics from Western Kentucky University.
NAR Economic Overview
Commercial real estate posted positive signs on the road to recovery during the first
quarter of this year. With fundamentals improving and investments growing, commercial
markets are facing a more optimistic landscape going forward into 2011. However, the
economic framework poses possible challenges.
Based on the Bureau of Economic Analysis’ first estimate, economic activity, as measured by gross domestic product (GDP), slowed during the first quarter. GDP advanced
a modest 1. 8 percent during the quarter. Both consumers and businesses reined in their
spending, while governments—federal, state, and local—have been looking for ways to
cut expenses across the board.
The equipment and software component of business spending, which had provided
a major boost during 2010, has slowed significantly in the past two quarters. From an
annual growth rate of better than 20.0 percent in the first half last year, it dropped to
7. 7 percent and 11. 6 percent in the past two quarters, respectively. The growth rate of
business spending is still quite respectable, but still falls well short of potential, given
the record high corporate profits. A good deal of activity has been focused on increasing
inventories, particularly in light of growing export opportunities.
During the quarter, the weakening of the dollar provided U.S. products a price
advantage. International trade gained ground. Exports of consumer goods increased at a
healthy 7. 8 percent pace. Imports of goods were also positive at 5. 9 percent during the
quarter. The main concerns for international trade centered on the impact of the Japanese
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