The decline in commercial real estate activity appears to be slowing, although it is expected to remain weak into 2010, the National Association of Realtors (NAR) said today.
The Commercial Leading Indicator for Brokerage Activity fell 1.3% to 101.5 in the second quarter from a downwardly revised 102.8 in the first quarter. The index is 13.7% below the 117.8 posted in the second quarter of 2008, and is at the lowest level since the first quarter of 1994, NAR said.
The sector has been bogged down by the severe credit crunch, sustained job losses and weak consumer spending.
NAR said in a statement that recent Federal Reserve actions should improve capital flow into commercial lending.
The rate of decline moderated in the quarter after a sharp, quick fall from its peak, according to Lawrence Yun, NAR’s chief economist.
“The reduction in commercial real estate activity is expected at least through the first quarter of 2010,” Yun said. “Any meaningful recovery is not likely to occur before the second half of next year.”
Falling industrial production, fewer jobs requiring office and retail space, a fall in durable goods shipments, much lower personal spending, lower retail and wholesale sales, and a negative return on commercial investment all contributed to the decline, NAR said.
“With the economic recession likely coming to an end within six months, a recovery in commercial real estate may soon follow,” Yun said. “The office sector requires job growth to fuel the demand for additional space, the industrial sector needs a rise in production and the retail sector is tied to consumer spending. Multifamily housing — the apartment market — often performs in reverse to trends in home sales, but can improve if there is sufficient household growth.”