Stimulus Funds Aids Real Estate Projects
While public nonresidential construction activity funded by stimulus money has been a gain for the major metropolitan cities mentioned, some of those gains were often offset by state and local government cutbacks, according to the Fed's Oct. 21 Beige Book.
With the exception of a few bright spots, commercial real estate continued to weaken across the 12 Federal Reserve districts of Boston, New York, Philadelphia, Cleveland, Richmond, Va., Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.
Dallas cited slight improvements in residential real estate and staffing firms, while New York noted gains only in a few sectors such as in manufacturing and retail. Retail and manufacturing conditions were mixed in Boston, but some signs of improvement were reported. New York, Philadelphia, Cleveland and San Francisco cited small pickups in manufacturing activity. In the Kansas City district, an uptick was noted in technology firms, while services firms posted revenue gains in Richmond. However, conditions were referred to as stable or flat for business services and tourism firms in Minneapolis and agriculture in St. Louis and Kansas City.
Meanwhile, as the number of occupancy rates continues to decline in commercial properties, several bank regulators are working together to come up with guidelines for loan workouts.
The FDIC, the Office of the Comptroller of the Currency and the Office of Thrift Supervision recently told a Senate committee that rental rates have dropped as a result of a reduction in occupancy levels in commercial real estate properties. As a result, the three banking regulators said they are keeping a keen eye on the structure of commercial and construction loans. Bank regulatory examinations are also set to look at the way the loans are organized.