Commercial Real Estate Index
The Commercial Real Estate Index, representing fourth quarter 2011 data, advanced 8. 3
points. The national index, based on 10 variables pertinent to the performance of U.S. industrial and office markets, rose 63.8 from 55. 5 in
the third quarter. The office sector increased 9. 3
points from an index value of 51. 7 to 61.0. The
industrial sector rose 8.0 points to 65.9.
The commercial markets posted a strong
finish in the fourth quarter. Geographically, all
four regions witnessed improved conditions.
Commercial markets in the South posted the
largest advance during the fourth quarter— 12. 7
points to an index value of 73.5. Markets in the
Midwest and Northeast advanced 8. 8 points and
7. 7 points, respectively. Markets in the West rose
3. 7 points, to an index value of 55. 2. In terms of
nominal index value, the South continues to register the best overall market conditions.
In an encouraging sign, leasing activity
improved, and practitioners reported vacancy
rates closing in on historical averages. Some
respondents mentioned declining vacancies
for their office and industrial markets. While
concessions remain the norm for 87 percent
of respondents, one in four practitioners found
rents in line with or slightly above long-term
averages. In addition, subleasing availability
continued to improve, with only 29 percent of
SIORs reporting ample sublease space.
Construction of new commercial space
remains at historically low levels—74 percent of
practitioners mentioned there was no new construction in their market. Development conditions registered a slight uptick, but favor buyers,
with acquisition prices lower than construction
costs in 78 percent of the markets. An improving economy reflected well upon local markets, as 84 percent of SIORs found the national
economy to have a negative impact upon their
markets (compared with 92 percent in the third
quarter).
Based on the results of the fourth quarter survey, commercial markets improved upon the flat
performance of the prior quarter. SIOR members
expect conditions to improve going forward into
2012, with 67 percent of respondents anticipating a better market in the next three months.
