Commercial Real Estate Index
SIOR Index — Commercial Markets
Rise 7. 2 Points in First Quarter 2012
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 Manager of Quantitative & Commercial
Research with the NATIONAL ASSOCIATION OF
REALTORS® in Washington, D.C. His research focuses
on macroeconomic indicators, commercial real estate, and
international investments. He writes regular columns for
Commercial Property Executive and Real Estate Insights,
and produces NAR’s Commercial Real Estate Outlook, which
provides quarterly forecasts for the office, industrial, retail and
multi-family sectors. He also manages the NAR Commercial
Real Estate Quarterly Market Survey. He earned his graduate
degree in Economics from Western Kentucky University.
NAR Economic Overview
At the midpoint of the year, the economy has been growing at a moderate pace.
With fundamentals improving and investments growing, commercial real estate
markets are poised to offer a good performance into the remainder of 2012.
Economic activity as measured by gross domestic product (GDP) expansion
slowed during the first quarter. Based on the Bureau of Economic Analysis’s
second estimate, gross domestic product (GDP) rose 2. 2 percent in the first
quarter of this year. Consumers and businesses moved in opposite directions.
Consumer spending advanced 2. 9 percent, while businesses cut their spending by 2. 1 percent. Meanwhile governments—federal, state and local—cut
expenses across the board.
After several quarters of investment in equipment and software, companies
moderated their spending. It is unclear which played a bigger factor: increasing economic uncertainty or the loss of generous depreciation allowances.
From an annual growth rate of 14. 6 percent in 2010 and 10. 4 percent in 2011,
spending on equipment and software rose by a mere 1. 7 percent in the first
quarter. Companies cut back their purchases of information processing and
industrial equipment. The only bright spot came from transportation equipment expenditures which rose by 17.0 percent. Of direct impact to commercial
real estate, spending on new commercial properties was down 12.0 percent.
However, riding a wave of a continuing soft dollar against Asian currencies,
international trade expanded. Exports of consumer goods increased 4. 1 percent, while imports of goods rose 3.0 percent during the quarter. Meanwhile,
falling commodity prices and the competitive pressure from increased trade