The Federal Reserve Board’s Beige Book released Dec. 1 certainly offers proof with nearly all of the 12 districts reporting less than significant increases in market activity. 

Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Mo.,  Minneapolis, New York, Philadelphia, Richmond, Va., San Francisco and St. Louis make up the Fed’s districts. 

In Boston, office leasing activity was roughly steady at a moderate pace, although tenants reportedly lack a sense of urgency to sign deals. Areas such as Hartford noted vacancy rates hovered around 20% and leasing demand remained muted due to a flat labor market.  

Rent rates continued to climb in New York as office vacancy rates also ticked up in October in both midtown and downtown Manhattan, the Fed reported. While commercial construction activity has picked up slightly it continues to remain sluggish with credit availability a restraining factor for the market.

New construction in Philadelphia is mostly limited to institutional, life sciences, multifamily and warehousing sectors in select markets, according to the Fed. Contributing to the weak demand for retail space is regulatory red tape for permits and financing barriers. 

Cleveland reported steady or slow improvement in nonresidential construction activity. While the number of inquiries has picked up recently, the biggest challenge facing builders at this time is adding backlog. Incubation period for public infrastructure projects can be as long as five years, the Fed noted. With construction contracts coming mainly in education, manufacturing, energy, and research and development, Cleveland said it is expecting modest CRE growth over the next six months.  

The Richmond district reported a mix of highs and lows in CRE and construction. Smaller projects were being built faster due to abundant labor availability. Contractors reported that refurbishing of commercial properties was up in both Maryland and the Carolinas, but no one was adding new capacity. Commercial and federal work has dried up in most areas of Virginia with Washington capturing much of what little work there is. North Carolina is prepping for several new manufacturing projects.

The majority of the Atlanta district’s CRE contacts noted modest improvement in nonresidential construction and leasing activity. Brokers reported that vacancy rates declined and that rents have begun to stabilize across much of the district. Contractors cited a small improvement in construction activity from earlier in the year. Still, most anticipate commercial real estate conditions to remain largely unchanged over the next several quarters.

Article source: http://www.cutimes.com/2011/12/11/commercial-real-estate-market-has-few-bright-spots?ref=hp