Professional Report

SIOR Index Results

In slight contrast with the economic momentum, office, and industrial markets benefitted from rising demand and a positive investment environment. The SIOR Commercial Real Estate Index, representing fourth quarter 2015 data, gained 1. 9 points from the third quarter. Compared with the fourth quarter 2014, the index rose 5. 6 percent. The national index, based on 10 variables pertinent to the performance of U. S. industrial and office markets, closed at 122.8, the highest value since its inception. 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 seventh quarter with a value above the 100-point threshold since the Great Recession.

With professional and business services
employment rising, SIOR office markets
registered strong values. The office index
reached a value of 112.9. The industrial
sector maintained its upward trajectory,
Both property indices have been over the
100-point value for at least the past six
quarters, indicating strong demand for
space.

SIOR members reported rising fundamentals, with positive developments in leasing and sales.

• Leasing activity exceeded historical levels for 58 percent of SIORs who responded to a market survey.

• Rents were flat for office and industrial properties—only 4 percent of SIOR members 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 81 percent of respondents reporting lower availability rates.

• Subleasing availability has become marginal, with only 20 percent of SIOR respondents feeling that tenants benefitted from concessions.

• New construction of office and industrial spaces improved, with over a third of markets reporting new construction during the quarter.

• Development conditions continued shifting in favor of sellers during the period, with 51 percent of SIORs rating it a seller’s market. Investment prices stayed level, with 39 percent of markets being below construction costs.

Improving local economies boosted real estate markets. Only 15 percent of SIOR respondents felt that their local economy was slowing or contracting, while 57 percent considered their economy to be strong and improving. Meanwhile, even with the fourth quarter slowdown, the national economy exerted a positive impact on local markets, with almost half of SIOR responses indicating a positive impact upon markets. In contrast only 15 percent of SIOR respondents experienced a negative impact upon their markets from national economic conditions (the remainder was neutral).