Commercial Real Estate Activity Mixed Across Districts: Fed
Though a little weaker than residential real estate, reports on sales and leasing of nonresidential real estate are still mostly positive.
That’s according to the Federal Reserve Board’s Beige Book released Wednesday which revealed commercial real estate was mixed across the 12 districts since the last analysis in November.
The report was prepared at the Federal Reserve Bank of Philadelphia and based on information collected on or before Jan. 4, 2013.
Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond, Va., San Francisco and St. Louis make up the Fed’s 12 districts.
The Boston district reported a drop in leasing beyond normal seasonal trends with contacts citing fiscal cliff uncertainty as a factor. Demand for commercial real estate loans appeared to be softening and the pipeline for new construction projects has diminished significantly since the last Beige Book, Boston reported.
Minneapolis and Kansas City have experienced increased demand and tightening commercial real estate markets while Philadelphia, St. Louis and Dallas all reported more modest increases in nonresidential real estate activity. Still, Dallas reported that construction was expected to pick up in the commercial real estate sector in 2013.
When it comes to providing financing, loan demand was largely unchanged in the Philadelphia, Cleveland, Richmond, Kansas City and San Francisco districts with most reporting a continuation of slight to moderate growth in total volume.
The New York, Atlanta, Chicago and Dallas districts reported stronger demand than the last Beige Book analysis while the St. Louis district reported a slight decline. Commercial real estate lending was cited as a particular bright spot by New York, Cleveland, Kansas City, and Dallas.
Some increased lending in Philadelphia, Chicago and Dallas was driven by businesses taking out loans for special year-end purposes such as tax planning and dividend payments, according to the data. Cleveland, Atlanta, Chicago, Dallas and San Francisco all reported strong auto lending.
Like commercial real estate across the districts, the quality of borrowers applying for loans was also a mixed bag.
Banks in the New York, Philadelphia, Cleveland, Chicago, Kansas City and San Francisco districts reported improvements in asset quality.
Lenders were described as competing aggressively for highly qualified borrowers in Philadelphia, Richmond, Atlanta, and San Francisco. In Atlanta, this stiff competition may be leading to loosening credit standards, as there was some indication that banks were more willing to increase their tolerance for risk, according to the Fed’s report.
Chicago banks also reported some loosening of standards. On the other hand, lending standards remained largely unchanged in New York, Cleveland and Kansas City.