This is the second straight quarterly dip after reaching a record of 120.7 in the second quarter of 2007. The index showed nine consecutive quarterly gains prior to these declines; NAR's track of the index dates back to 1990.
Lawrence Yun, NAR chief economist, said the latest index suggests reduced business opportunities for commercial real estate practitioners in the months ahead. "The decline in the index implies that commercial activity, as measured by net absorption and the completion of new commercial buildings, is likely to contract moderately over the next six to nine months, which is consistent with an expectation for slower overall economic expansion in upcoming quarters," Yun said.
Rising unemployment insurance claims and falling durable goods shipments were the key factors in lowering the CLI, but a weaker rate of return on investment as measured by the NAREIT Price Index was also a factor. The only positive contributors to the index were growth in wholesale and retail trade, and rising personal income.
"The latest data imply that investment in private nonresidential structures, which rose a solid 13.2 percent in 2007 according to a preliminary GDP estimate, could show only minimal growth or even decline in 2008," Yun said. "Realtor members who specialize in office and industrial properties indicate in a separate survey(2) that they anticipate a measurably lower level of business activity in the upcoming quarters."
