CRE May Stay Weak into 2010, Capital Flow to Improve?

Commercial real estate is expected to remain weak into 2010, but recent actions by the Federal Reserve should improve some flow of capital into commercial lending, the National Association of Realtors' forward-looking Commercial Leading Indicator for Brokerage Activity shows. The Indicator declined 1.3% to an index of 101.5 in the second quarter from a downwardly revised reading of 102.8 in the first quarter, and is 13.7% below the 111.9 recorded in the second quarter of 2008. The index is at the lowest level since the first quarter of 1994. NAR's tracking of the indicator dates back to 1990. NAR chief economist Lawrence Yun said that the pace of decline moderated, but the leading indicator has fallen sharply and quickly from the peak, suggesting much lower business opportunities for commercial real estate practitioners engaged in leasing, sales and property management. "The reduction in commercial real estate activity is expected at least through the first quarter of 2010," he said. "Any meaningful recovery is not likely to occur before the second half of next year." However, Mr. Yun added that with the economic recession likely coming to an end within six months, a recovery in commercial real estate might soon follow.