Activity in the commercial real estate (CRE) sector is closely linked to broader economic conditions. However, tracking developments in the CRE sector can be challenging due to the sector’s wide span of activities. At their inception, commercial properties involve construction activity, land development, and local infrastructure investments; once constructed, commercial properties can be used for a variety of purposes. The CRE sector also often reflects the regional economic landscape more than it is shaped by national features. To understand changing conditions in their regions, community leaders and policymakers need timely data on CRE activity.
Recognizing both the broad connections and regional drivers of the CRE sector, Nicholas Sly and Bethany Greene introduce a new indicator of regional CRE activity: the Kansas City Fed CRE Index. This index encompasses a broad range of related economic activities and financial considerations based on timely survey responses from market participants across the Tenth Federal Reserve District—a seven-state region that includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of Missouri and New Mexico. This article demonstrates how the CRE index can capture regional trends in CRE activity, offer insight about future growth in construction employment, provide a leading indicator of CRE loan performance, and reveal the drivers of developments in the sector in a timely manner.
Publication information: Vol. 109, no. 2
DOI: 10.18651/ER/v109n1SlyGreene
The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
Authors
Nicholas Sly
Vice President, Economist, and Denver Branch Executive
