Increase in Real Estate Association’s Commercial Indicator

February 27, 2018

BCREA CLI graphFeb2018BC – The BC Real Estate Association’s Commercial Leading Indicator (CLI) increased for a fourth consecutive year, rising 0.4 points in the fourth quarter of 2017 to 135.7. That increase represents a 0.3 per cent rise over the second quarter and a 6.7 per cent increase from one year ago.

The fourth quarter saw continued strong economic activity throughout the province, with notable increases in retail and manufacturing sales. Those gains, along with a surge in real estate investment trust (REIT) prices toward the end of 2017, helped to offset a downturn in employment growth over the fourth quarter.

Growth in the BC economy will not reach the heights of the past four years in 2018, but will be strong enough to keep the economic environment for commercial real estate supportive of growth investment, leasing, and other commercial real estate.

The economic activity component of the CLI continues to be the primary driver of growth in the index.The fourth quarter saw broad-based gains including 3.2 per cent quarterly growth in manufacturing sales. The index has also been buoyed by the strongest annual retail sales growth in over two decades.

Employment growth in the provincial economy registered 3.7 per cent in 2017 with key commercial real estate sectors posting strong contributions to that growth.However, job growth slowed in the fourth quarter with the CLI ofce employment measure falling by about 100 jobs, while manufacturing payrolls contracted by 5,600 jobs.

Despite a tightening credit environment and rising interest rates, the CLI’s fnancial component managed to eke out a small increase in the fourth quarter. That increase was the result of a late surge in REITs that more than offset widening short-term credit spreads.

The BCREA Commercial Leading Indicator forecasts changes in broad commercial real estate activity. Our research shows that the variables that compose the CLI reliably forecast BC commercial real estate activity at a lag of two to four quarters. The index is revised each quarter, due to revisions in the underlying data.

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