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Federal Reserve Reports Improving CRE Activity
Real estate activity generally expanded in April and May, the Federal Reserve reported yesterday in its Beige Book.
“Construction and real estate activity generally expanded since the last report (in early April) and the overall outlook among contacts in these industries remained positive,” the Fed said. “Overall loan demand was up moderately in all but one of the districts that reported it and many districts reported steady to good credit availability.”
The Fed noted that commercial construction activity increased in its Philadelphia, Richmond and Minneapolis districts. It found strong project pipelines in the Cleveland district and some contractors in the Atlanta district noted one- to two-year backlogs.
Fed contacts in the St. Louis, Mo. area reported an uptick in industrial construction, though activity remained varied across Boston area markets.
Multifamily construction continued to grow in many Fed districts including New York, St. Louis and Dallas, but Atlanta reported slowing activity. In San Francisco, multifamily construction continued to outpace single-family construction. In Boston, apartment construction remained “very active,” but related lending slowed among smaller banks.
Space absorption increased in the Atlanta and Kansas City districts while Dallas reported particluarly healthy demand for office space. The Fed noted declining vacancy rates and rent increases in the Chicago and Minneapolis districts.
Fed contacts in San Francisco said commercial real estate demand expanded particularly strongly in urban areas with robust technology and health care industries.
Overall loan demand increased moderately in all districts that reported except for Dallas, the Fed said.
Price pressure grew slightly in most districts. Multiple districts noted small price increases in building materials including concrete and steel. Contacts in Cleveland reported higher construction prices to cover rising worker costs resulting from tight labor markets.