Economic Momentum Keeps SIOR Markets
Growing in Third Quarter 2014

December, 2014—WASHINGTON, D.C. — Members of the Society of Industrial and Office REALTORS® (SIOR) participated in the Commercial Real Estate Index survey, supplying their knowledge of the industrial and office market conditions in the United States for the third quarter of 2014. The responses, given by 419 SIOR members, compiled by SIOR in association with the National Association of REALTORS® (NAR), present an accurate depiction of the current industry for the middle of 2014.

Office and industrial markets continued on an upward trajectory in the third quarter; with the SIOR Commercial Real Estate Index increasing 4.1 points (3.8 percent), moving from 108.3 to 112.4, putting the CREI over what is considered the balanced market threshold at 100 points for the second consecutive quarter since the last recession, and the highest CREI value since the third quarter of 2007. The SIOR Index measures ten variables pertinent to the performance of U.S. industrial and office markets (see methodology).

Leasing improved in the third quarter of 2014; 49 percent of respondents feel that leasing activity in their market is higher than historic levels; 27 percent found leasing in line with averages, while 24 percent find leasing below normal (compared with 33 percent last quarter).

Rents continue rising; 4 percent of respondents feel that asking rents are below where they were one year ago (6 percent last quarter); 96 percent indicate that asking rents are in line with or slightly above long-term averages.

Subleasing availability declined this quarter. Only 5 percent feel that there is ample sublease space available, compared with 8 percent last quarter; 62 percent consider subleasing to have a small influence on the market. Vacancies also continue declining as 7 percent of respondents indicate that vacancy rates are higher than a year ago; 17percent contend they are the same and 76 percent say they are lower (78 percent last quarter).

However, construction activity is improving; 27 percent indicate rising new construction; 15 percent find development close to historical averages; 31 percent of respondents indicate levels lower than normal, and 27 percent mention that there is no new commercial construction in their market.

In terms of development acquisitions, the markets are changing—it is a buyer’s market according to 25 percent of respondents (33 percent last qtr.); 36 percent find it a balanced market, while 38 percent experienced a seller’s market this quarter (32 percent last quarter). Construction activity is improving—26 percent indicate rising new construction; 12 percent find development close to historical averages; 29 percent of respondents indicate levels lower than normal, and 33 percent mention that there is no new commercial construction in their market.

On the investment side, prices were below construction costs in 49 percent of the markets, compared with 50 percent last quarter; prices were above cost in 29 percent of the markets.

Local economies are impacting real estate markets at a receding pace—17 percent of respondents feel that their local economy is slowing or contracting, compared with the 17 percent from last quarter.  Meanwhile, 50 percent consider the local economy to be strong and improving (44 percent last quarter).

The national economy continue to impact local economies, but at a diminishing rate—23 percent of respondents feel that the national economy is having a negative impact on their local market (33 percent last qtr.); 34 percent feel that the national economy is having a positive impact on their markets.

When asked about the outlook for the next three months, participants pointed to a slightly improving market—1 percent indicates that business is going to be down from current levels, 21 percent of respondents feel the market will be maintaining the current level during the next three months, and 78 percent point to expected improvement in the market.

Office Market

Although employment trends moved upward, demand for office spaces moderated.  The office index rose 1.1 points, to a value of 100.6.  It is the first time that the office index crossed the 100-point threshold since the third quarter of 2007.

Industrial Market

The industrial sector maintained momentum, gaining 5.4 points; the industrial index has been positively above the 100-point threshold for the past 4 quarters.

Regional Breakdown

The West

Geographically, all four regions gained—the West advanced the most this quarter with a 5.5 point increase, bringing the index value to 110.1.

The Midwest

The Midwest had the second highest index value—112.9—but showed only a .4 point increase from last quarter.

The Northeast

The Northeast posted an index of 103.9, the result of a 3.2 point advance in market conditions.

The South
The South retained the highest index value with a value of 116.6, showing an increase of 3 points, indicating the most robust market conditions 







The SIOR Commercial Real Estate Index is constructed as a “diffusion index,” a very common and familiar indexing technique for economic measures. Other examples of diffusion indexes include the Index of Leading Economic Indicators, the Consumer Confidence Index, and the Institute of Supply Management’s Purchasing Managers’ Index. In the SIOR Commercial Real Estate Index, a value of 100 represents a well-balanced market for industrial and office property. Values significantly lower than 100 indicate weak market conditions; values significantly higher than 100 indicate strong market conditions. The theoretical limits of this Index are a low of zero, and a high of 200, though it is unlikely that such limits would be approached as long as the property markets are operating efficiently.


The Index is based on a survey questionnaire with ten topics. The topics covered are (1) recent leasing activity; (2) trends in asking rents; (3) trends in vacancy rates; (4) subleasing conditions; (5) levels of concession packages in leases; (6) development activity; (7) site acquisition activity; (8) investment pricing levels; (9) the impact of the local economy on the property market; and, (10) the effect of the national economy on the property market. Survey respondents are given five choices. For each topic, five choices are provided, corresponding to conditions that are very weak, moderately weak, well-balanced, moderately strong, or very strong.


For each question, answers are tallied and the percentage of responses for each of the five choices is calculated. If survey panelists indicate “very weak” conditions (the “a” choices in the questionnaire), the answer is assigned 0 (zero) points; “moderately weak” (“b” answers) earn 5 points; an indication of “market balance” (“c”) receives 10 points; “moderately strong” indications (“d”) score 15 points; and “very strong” (“e”) responses receive a maximum 20 points. Thus a score of 10 for a given question can be earned if responses are evenly distributed across all five choices, if all responses were “c”, or if the answers form a “bell-shaped curve” centered around the “c” choice. The total index value is derived by summing the scores for all ten questions. Index values for each of the two property types are similarly calculated.


The survey was developed by Hugh F. Kelly, CRE, clinical professor at New York University, who worked with SIOR on research projects since 1989.


Headquartered in Washington, D.C., the Society of Industrial and Office Realtors® ( is a global professional organization that certifies commercial real estate service providers with the exclusive SIOR designation. Individuals who earn their SIOR adhere to the highest levels of accountability and ethical standards. Only the industry’s top professionals qualify for the SIOR. Today, there are 3,000 SIOR members in 640 markets in 31 countries.



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