The fourth quarter also registered an improvement in wages
and salaries, which advanced 4. 6 percent year-over-year.
Wages and salaries for all of 2014 rose 4. 3 percent compared
with their levels in 2013. The largest gains came for private
industries, where wages increased 5.0 percent compared with
1. 2 percent gain for government workers. These figures were
not adjusted for inflation.
Consumer confidence—as measured by the Conference
Board—picked up toward the tail end of last year, rising to
92.7 in the fourth quarter, from 80.5 in the first quarter 2014.
Meanwhile, the University of Michigan’s Consumer Sentiment
Index also rose, to its highest value since the first quarter 2007,
reaching 89.8 in the fourth quarter.
SIOR INDEX RESULTS
Office and industrial markets reflected the positive economic
environment in the fourth quarter. The SIOR Commercial Real
Estate Index, representing fourth quarter 2014 data, gained 3. 9
points. The national index, based on 10 variables pertinent to
the performance of U.S. industrial and office markets, closed
at 116.3, the highest value since the first quarter of 2007. An
index value of 100 shows a balanced market, meaning that
the national index has surpassed its historical average, and is
pointing to growing conditions. The figure represents the third
quarter with a value above the 100-point threshold since the
With professional and business services employment rising,
SIOR office markets registered strong advance. The office
index rose 6. 3 points, to a value of 106.9. The industrial sector
maintained its upward trajectory, with the index rising 1. 2
points, to a value of 120.0. The industrial index has been over
the 100-point value for the past five quarters, indicating strong
demand for space.
SIOR members reported rising fundamentals, with positive
developments in leasing and sales.
• Leasing activity exceeded historical levels for half of
SIORs who responded to a market survey.
• Rents were flat for office and industrial properties—only
4 percent of SIORs considered that asking rents were below
those of one year ago. Meanwhile, 96 percent ascertained
that rents were in line with or above long-term averages.
• Vacancies continued declining, with 76 percent reporting
lower availability rates.
• Subleasing availability has become marginal, with less
than 30 percent of SIORs feeling that tenants benefitted from
• New construction of office and industrial spaces improved,
with almost a third of markets reporting new construction
during the quarter.
• Development conditions continued shifting in favor of
sellers during the period, with 40 percent of SIORs rating
it a seller’s market. Investment prices stayed level, with 50
percent of markets being below construction costs.
Improving local economies boosted real estate markets. Only
17 percent of SIORs felt that their local economy was slowing
or contracting, while 51 percent considered their economy to
be strong and improving. Meanwhile, a strengthening national
economy translated into almost half of SIORs feeling that it
provided a positive impact upon their markets. In contrast only
14 percent of SIORs experienced negative impact upon their
markets from the national economic conditions (the remainder
was neutral). Regionally, all four main regions posted gains,
with index values above 100, signifying market expansion.
The Midwest overtook the South during the fourth quarter,
as the strongest region, with an index which reached a
value of 120.7—the highest of all regions. The South had
the second highest index value—118.1. The West region
experienced the second fastest growth pace during the
quarter, with a 6. 9 point advance, reaching an index value
of 117.0. The Northeast closed the quarter with an index
value of 106.5.
Looking ahead at the first quarter of 2015, SIOR members
expect the outlook to improve—83 percent of respondents
indicated growth in the 1-15 percent range, while 12
percent felt the market will maintain current levels. Only
5 percent of SIORs expected conditions to decline.
Northeast Midwest South West
Source: SIOR, NAR