US commercial real estate growth slows in Q1 -NAR

NEW YORK, May 21 (Reuters) - The U.S. commercial real estate market expanded in the first quarter of this year but the pace of growth has cooled over the past year with the overall economy, according to a real estate agent group.

The National Association of Realtors said its index on future commercial property activity rose to a record high of 120.3 in the first quarter, up 0.2 percent from the fourth quarter and up 0.8 percent from the same 2006 quarter.

The modest uptick suggested steady absorption of industrial and office space in the next six to nine months with slightly higher completions of office, warehouse, retail and hotel buildings, the association said.

A combination of positive factors including rising industrial output and steady job growth led to the index's rise in the first quarter, said Lawrence Yun, the Washington-based group's senior economist.

"On the other hand, deteriorating economic conditions have been a drag, specifically, a marked decline in durable goods shipments, a decline in return on commercial investment and an increase in the number of people filing for unemployment insurance," Yun said in a statement.

Commercial property growth, while slower than a year ago, would persist into the second half, the group said.

Leasing and sales of commercial real estate are predicted to rise 0.8 percent in the third quarter versus the same quarter of 2006, it said.

Third-quarter net space absorption in office and industrial sectors would be 10 million to 20 million square feet, with about $335 billion to $345 billion in newly completed commercial construction. This compares with $323 billion of brand-new construction recorded in the first quarter.