From the “summary” section of the report:
Real Estate and Construction
Overall residential real estate activity increased, but conditions were varied across Districts. Philadelphia, Richmond, Minneapolis, Kansas City, and Dallas noted increased activity. New York, Boston, Cleveland, and San Francisco reported flat activity at relatively low levels. Atlanta and St. Louis indicated decreased sales. Residential construction remained sluggish. Single-family home construction remained weak, while multifamily construction picked up in New York, Philadelphia, Cleveland, Chicago, and Minneapolis. San Francisco remained “anemic”, while St. Louis and Kansas City reported decreased activity.
Commercial real estate markets remained sluggish across most of the nation. Boston, New York, Chicago, Minneapolis, and San Francisco indicated roughly unchanged activity. Atlanta and Kansas City noted slight improvement. Philadelphia and Dallas indicated mixed activity. However, Richmond and St. Louis noted that vacancy rates increased. Commercial construction was somewhat mixed. Cleveland saw steady to slowly improving commercial construction; Chicago and Minneapolis experienced modest to moderate increases. New York and Philadelphia noted generally weak conditions; Richmond and St. Louis reported slow activity, although industrial construction picked up.
From the “First District” section of the report (this District includes Boston)
Commercial Real Estate
The majority of contacts in the First District describe conditions in commercial real estate markets as roughly unchanged since the last report, although some note small improvements in fundamentals. In Hartford, vacancy rates for Class A downtown office space continue to hover around 20 percent and leasing demand remains muted in light of a flat labor market. In Boston, office leasing activity is roughly steady at a moderate pace, although tenants reportedly lack a sense of urgency to sign deals. Boston’s Back Bay and East Cambridge submarkets continue to show strong demand and relatively low vacancy rates, with the result that rents on Class A office space in Back Bay now exceed those for comparable space in Boston’s financial district, where vacancy rates remain in the mid-teens. Portland saw modest absorption of retail and Class B office space and in recent weeks amid strong overall leasing volume, while some new vacancies arose in the Class A office market. Leasing demand tapered off in recent weeks in Providence, as suburban Rhode Island experienced a modest uptick in leasing activity.
The investment sales market remains strong in Boston, as prices edge slightly higher for prime office and apartment buildings. Apartment construction in greater Boston remains very active, with numerous developments in progress and more new buildings in the pipeline, although other construction activity remains limited throughout the region. The lending environment continues to offer plentiful financing—and on increasingly favorable terms—for premier properties, especially in Boston, while financing remains harder to obtain for riskier properties and those in secondary and tertiary markets.
Residential Real Estate
Sales activity in New England for single-family homes and condominiums continues to languish according to contacts throughout the region. Sales figures rose moderately in September compared to a year ago, but these increases reflect several months of dismal sales following the expiration of the tax credit in mid-2010. Respondents say housing market conditions have remained largely unchanged in the last several months. Most contacts characterize the market as stable and consistent, but believe the beginning of a recovery remains fairly distant. While low interest rates have made financing more affordable to qualified homebuyers, contacts report tighter credit standards as a constraint. The median sale price of homes also rose in September from a year earlier in the region, except for Rhode Island, where prices have been below year-earlier levels for several months. October data for the Greater Boston area, by contrast, show a 10.5 percent year-over-year decline in the median sale price of homes.
Outlooks for the remainder of the year are mixed, with some contacts anticipating 2011 sales falling short of last year and others predicting sales to reach last year’s level. Respondents expect relatively stable prices in the coming months, but note the possibility of moderate declines.
There are 12 Fed Reserve “Districts”, and each district provides its own narrative. To access the complete Fed Beige Book Report (so that you can read what the Fed says is going on in your District), click on this link: