Professional Report - 1st Quarter 2012

Commercial Real Estate Index

SIOR Index — Office and Industrial
Markets Rise 8. 3 Points in Fourth
Quarter 2011

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

Economic activity closed 2011 with a moderately positive performance, driven by increased consumer and business spending. With employment trends moving in an upward direction, the outlook for commercial real estate points to a stronger 2012.

Based on the Bureau of Economic Analysis’s estimate, gross domestic product (GDP) rose 3.0 percent in the fourth quarter. Consumer spending provided a much-needed boost to the year-end tally. The other components of GDP— business spending, net exports held steady while government expenditures were negative.

Following barely positive advances throughout the year, consumer spending rose 2. 2 percent in the last quarter. Spending on goods outpaced spending on services by a wide margin. Consumers focused their dollars on durable goods, which gained 15. 3 percent. With the average age of U.S. vehicles on the road reaching record highs, it was not surprising that sales of vehicles jumped 37. 9 percent. Consumers also upped their spending on furniture, household and recreational vehicles by 8. 7 percent and 11. 7 percent, respectively. In the nondurable goods category, purchases of clothing and shoes propped up the holiday sales, rising 3. 3 percent.

Business investments posted the weakest rate of growth in two years, advancing only 2. 8 percent during the fourth quarter. While spending on equipment and software remained steady at 4. 8 percent, spending on structures declined 2. 6 percent. Companies continued investing in industrial equipment (up 17. 9 percent), computers and peripherals (up 15. 4 percent), and transporta-