The Federal Reserve’s Beige Book, the published-six-times-yearly compendium of anecdotes from every corner of the economy, issued its newest edition yesterday. Within, we learn the commercial real estate market, viewed from a national perspective, is showing good signs – expansion in transactions and construction plus rising rents characterize many of the Fed’s twelve districts.
Last week saw the publication of the latest Beige Book, the six-times-annually published economic activity report from the Federal Reserve Bank that looks at the whole country divided by Federal Reserve Districts. You can read the entire Fed Beige Book after the link. Below find the key takeaways for commercial real estate nationally:
Real Estate and Construction (Nationwide)
Most reporting Districts characterized nonresidential real estate activity as modest to moderate; Boston and New York indicated little change. Rental rates rose in more than half of the reporting Districts, and vacancy rates were mixed. Most Districts reported modest or moderate growth in commercial construction, and the Dallas District noted high levels of industrial construction in Dallas-Fort Worth. Contacts in the Atlanta District expect construction activity to increase slightly, while contacts in the Philadelphia, St. Louis, Minneapolis, and Richmond Districts expect overall commercial real estate activity to continue to strengthen at least modestly.
Banking and Finance (Nationwide)
Lending activity appears to have improved on net. 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. Philadelphia reported the strongest loan growth for autos, commercial real estate, and commercial and industrial deals, while residential lending was flat to down.
Banking and Finance (Chicago District)
Financial conditions tightened slightly on balance over the reporting period. Financial market contacts noted greater illiquidity 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.
Construction and Real Estate (Minneapolis District)
Commercial real estate activity was moderate to strong since the last report. Retail, office, and industrial vacancies in Minneapolis-St. Paul have been falling and rents have been rising, according to multiple industry reports. In northwestern Montana, commercial vacancies “have mostly disappeared,” with rates stabilizing at about 5 percent, said a local source, while the Rapid City market “has been extremely active these last couple of weeks of the year.” […]
The Federal Reserve publication entitled the Beige Book is not, as its title might suggest, a handbook for interior designers with a preference for inoffensive colors. It is an eight-times yearly published report of the Federal Reserve Board also known as Commentary On Current Economic Conditions. The reports gather “anecdotal information on current economic conditions” in each of the eight Federal Reserve Bank Districts.
The Federal Reserve has issued some changes concerning commercial real estate. One is a clear positive in its new Beige Book, or collection of economic conditions across the country, and another change is more ambiguous — a proposed update in the Fed’s capital requirements made of banks.