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Jan 25
2010
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December's index of leading economic indicators, published by The Conference Board, showed an increase of 1.1 percent. The index showed a 1 percent increase in November, and a .3 percent increase in October. Could this mean that we're out of the woods? The index, which covers stock prices, initial jobless claims and consumer sentiment, among other indicators, has risen month-over-months in each of the past nine months.
Initial claims for unemployment insurance helped bring up the index in December. Early information for January shows an uptick in initial claims, but the rate of job contraction seems to be approaching levels consistent with payroll stabilization. As consumer demand increases throughout 2010, a net gain of approximately 1 million jobs will occur this year.
In the real estate industry, some indicators will continue to show declines throughout the year, as these numbers often lag economic recovery by six months or so.
THE GOOD NEWS:
The multifamily real estate industry, unlike the rest of the commercial real estate industry, may begin to show gains sooner than later. As job gains fuel household growth and recent college graduates find more employment (allowing them to rent their own apartments), the multifamily sector is expected to see some recovery. Apartment vacancy rates are forecast to improve (decrease) by 30 basis points to 7.8% nationwide in 2010. A decrease in new construction will further help improve vacancy rates and rent growth down the road in 2011.
The industrial sector is also expected to see some improvement, according to the report. As consumer and corporate spending revs back up, company inventory will also need to increase, prompting new demand for industrial space. Positive absorption of approximately 16 million square feet of industrial space is expected to occur. Vacancy in the industrial market will continue to increase, but only by 20 basis points in 2010.
I'm excited to see economic indicators continue to increase in the coming months - especially as they relate to the New York commercial real estate market, which was one of the last markets to feel the effects of the ‘great recession.' If the The Conference Board's predictions are accurate, we should see transaction velocity in the multifamily market begin to increase as vacancy decreases and rents increase.
