The commercial real estate industry does not lack for market data. Vacancy rates, absorption figures, rent growth, cap rate movement, and transaction volume all get tracked closely and published on a reliable cadence. What most of that data has in common is that it describes conditions that already exist. By the time a vacancy rate moves, the leases driving it were signed months earlier, and the decisions behind those leases were made earlier still.

The National Association of REALTORS launched a Commercial Real Estate Demand Index in August that attempts to work further upstream. Rather than measuring the property market, it measures the local economic activity that eventually produces demand for space, covering 306 metropolitan statistical areas on a quarterly basis with history back to 2022.

“We are not measuring vacancy, transactions, or rent growth. Those are important but we want things that are leading up to those,” said Nadia Evangelou, Principal Economist and Director of Real Estate Research at the National Association of REALTORS. “Two markets might have the same vacancy rate but one might be growing and one might be completely stagnant.”

That distinction is the point of the exercise. A market at 12 percent vacancy with rapid employment growth and a market at 12 percent vacancy with flat employment are the same number describing two very different situations, and conventional market reporting does not separate them.

The index handles each property type on its own terms rather than applying a single growth measure across the board. Office demand is tracked through professional and business services employment. Industrial runs on manufacturing, transportation, and warehousing employment. Retail draws on retail trade alongside leisure and hospitality. Multifamily uses population growth and net migration, both domestic and international. All of it comes from publicly available government data.

Population appears in the model but does not dominate it, which is a deliberate choice. “Population is only one part of a story,” Evangelou said. “When people move, businesses follow, so it is a factor, but when it comes to CRE demand there are other impacts as well.” A metro adding residents without adding professional employment is not generating office demand, and the sector-specific structure captures that in a way a general growth ranking would not.

The four sector scores roll into a composite, scaled so that 100 represents the average metro and every 15 points equals one standard deviation. The comparison is relative rather than absolute, meaning each metro is measured against the other 305 rather than against a national benchmark. A score below 100 indicates weaker momentum relative to peers rather than contraction.

Looking across the results, smaller and midsized markets are the ones that stand out. St. George, Utah topped the inaugural ranking at 128. Ocala, Florida came in at 123. Grand Forks and Lakeland-Winter Haven both scored 121. Raleigh ranked highest among the 50 largest metros, also at 121, and is stronger now than it was during the pandemic migration peak.

“Smaller midsized markets generally do well. The changes are more noticeable,” Evangelou said. That is partly a function of scale. A few thousand jobs in a metro of 200,000 registers as meaningful momentum, while the same additions disappear into the noise in a market of five million. Whether that makes the index more useful or simply more volatile in smaller markets is something the quarterly history will eventually answer.

The historical data also shows how quickly leadership rotates. Austin remains a strong performer but has cooled considerably from its 2022 peak, and several Florida metros have followed a similar path. The Midwest ranks weakest overall, with Illinois, Iowa, and Wisconsin metros averaging in the high 80s to low 90s, though Springfield, Missouri and Bloomington, Indiana both crossed above 100 this year.

Demand is only one side of the equation, and NAR is aware the index currently measures it in isolation. “One day, I think we could find a way to not only look at the demand but also how much supply there is in those markets that might absorb the demand,” Evangelou said. A metro with strong demand signals and a heavy construction pipeline is a different investment case than one with the same signals and no new supply coming, and connecting the two would make the tool considerably more actionable.

Asked to reduce the whole model to a single factor, Evangelou did not hesitate. “Job creation is really king,” she said. “There are lots of other factors that can create tailwinds like affordability and livability, but without the jobs it will not translate to CRE demand.” That is not a new idea in commercial real estate, but having it tracked quarterly across every metro in the country gives it a form that investors and brokers can actually work with.

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