Federal Reserve: CRE Activity Improves; Financial Conditions Tighten
Commercial and multifamily real estate activity generally improved over the past six weeks, the Federal Reserve reported. But financial conditions tightened slightly.
The Fed’s Beige Book noted less liquidity in the bond market. “In addition, a contact in commercial real estate financing reported a decline in interest from institutional investors amid concern that the commercial real estate market was overheated,” the report said.
The Fed noted stronger activity in multifamily and commercial real estate construction in most of its 12 districts. Commercial rental rates also rose somewhat in most districts.
Apartment construction remained strong in the New York, Richmond, Minneapolis and San Francisco districts and improved in the Chicago area. Most districts reported “modest or moderate growth” in commercial construction as well, and the Dallas district noted significant industrial real estate construction in the Dallas-Fort Worth metro. Rental rates rose in more than half of the reporting districts, but vacancy rates were mixed.
Fed contacts in the Atlanta district said they expect construction activity to increase slightly, while contacts in the Philadelphia, St. Louis, Minneapolis and Richmond districts expect overall CRE activity will continue to strengthen at least modestly.
Lending activity improved, the Fed said. Philadelphia reported the strongest commercial real estate loan growth while residential lending held steady or dipped. The San Francisco district noted “robust” mortgage origination growth. Loan demand grew on balance in the Philadelphia, St. Louis and San Francisco districts. Cleveland, Richmond and Kansas City reported stable credit demand on balance while Dallas noted some recent softening.
Credit conditions generally improved, the Fed said. The New York, Philadelphia, Richmond and San Francisco districts cited improved credit quality, declining delinquencies or both in all or part of their districts. The Cleveland district reported no delinquency changes.
