Commercial Real Estate Steady: Fed
In most of the 12 Federal Reserve Districts, commercial real estate activity has been steady to strong so far this year.
That’s according to the Fed’s June 4 Beige Book on current economic conditions in the districts of Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond, Va., San Francisco, and St. Louis.
The Fed’s analysis was prepared at the Federal Reserve Bank of New York and was based on information collected on or before May 23.
In the Atlanta district, commercial builders and brokers indicated that demand for commercial real estate continued to improve as apartment construction remained fairly strong with the level of construction activity across other property types following suit.
Commercial real estate also improved in the Chicago district thanks to a growing demand for leased buildings and office space, according to the Fed. Industrial buildings and retail construction, particularly with grocery stores, experienced an increase in activity as well.
Several cities in the St. Louis district including Louisville, Ky., reported growth in downtown commercial projects, while Memphis noted a steady demand for industrial space.
Industrial vacancy rates dropped in the first quarter and were expected to continue falling for the rest of the year in the Minneapolis district.
The Kansas City district noted a decline in commercial real estate vacancy rates, an increase in absorption, higher sales, and strengthening construction activity, according to the Fed.
Office leasing activity remained robust, and contacts noted strong growth in rents in the Dallas district. Occupancy remained at high levels, and contacts in Houston said they were beginning to see interest from foreign investors. Demand for industrial space was also strong, especially in Dallas.
In other districts such as Boston, some investors are reportedly starting to balk at city’s high commercial real estate prices, but overall investor interest remained very high. Contacts in the district were mixed on the sector’s outcome over the coming months depending on how the economic growth fared at both the local and national levels.
In the Richmond district, mixed use construction, grocery-anchored projects and an increase in retail tenants were on the upswing.
Commercial developers in the Cleveland district said financial institutions were more interested in financing projects but were asking for more paperwork.