BC Commercial Leading Indicator Moves Higher

The BCREA Commercial Leading Indicator (CLI) increased 1.1 points to 109.8 in the third quarter of 2011, reversing the downward trend observed in the first half of the year. The trend in the CLI, a more reliable indicator of future activity, points to a flattening out of commercial real estate activity over the following two to four quarters.

The strong rebound in the CLI in the third quarter was driven largely by strong manufacturing activity and job growth. Given the heightened risk environment in financial markets, the CLI's financial component (composed of risk-spreads and REIT index returns) made a negative, albeit small, contribution to the index for the first time since the fourth quarter of 2008.

The CLI peaked at a level of 116.1 in the second quarter of 2007 before the onset of the financial crisis pushed it to 98.1 in the first half of 2009. The CLI has since recovered 95 per cent of its previous peak level.

"A strong rebound in the BC manufacturing sector lead the CLI higher last quarter," said Brendon Ogmundson, BCREA Economist. "However, rising tension in financial markets and slowing global economic growth may create significant headwinds in coming months."

Copyright BCREA reprinted with permission