As any real estate professional knows, the CRE sector directly influences and is influenced by the broader economy. Now the Kansas City Fed has come up with an index it believes can help to measure those interactions for a particular region to enable improved forecasting and planning.

An article by Nicholas Sky, vice president of the Federal Reserve Bank of Kansas City, and researcher Bethany Greene, points to the tight link between CRE activity and the financial sector, including banks and the broader financial markets. And it contends that CRE development in a given area often has more to do with the regional economic landscape than with  aggregate conditions. "Community and regional banking organizations tend to have high CRE loan concentrations, further tightening the regional connections to the sector," the authors write.

The Kansas City Fed CRE Index is an attempt to decipher these local linkages, and to "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." It relies on data collected in the KC Fed Beige Book eight times a year from survey participants in the Tenth Federal Reserve District, which includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of Missouri and New Mexico. The index is intended as a quarterly indicator of CRE activity in the Tenth District. It serves as a simple tool to track local developments and provides early insights  of future developments.