The First District economy continued its moderate expansion early this spring, with credit demand on the increase, a strengthening real estate market and growth across other industries, the Federal Reserve said this week in its most recent Beige Book report.
Commercial real estate contacts in Boston reported that brisk demand for and tight supply of office space in some areas of the city, including the Seaport District and Back Bay, pushed up asking rents in those locations in recent months. Speculative office construction remains limited, although respondents say that the pipeline of planned office construction for greater Boston is growing.
Contacts told the Fed they were concerned that prices being paid by investors for commercial properties in Boston, along with lending terms for commercial mortgages, embody highly optimistic assumptions concerning future rent growth on the properties. Demand for Boston properties has been particularly strong among foreign investors and domestic pension funds.
A few contacts, in Boston as well as elsewhere in the region, worried that current construction levels of high-end apartments could be excessive in relation to potential demand for such units. At the same time, these contacts told the Fed that recently delivered luxury apartment units appear to be fetching rents in line with developers’ projections.
In Hartford, sluggish leasing activity is attributed to the long, harsh winter, although fundamentals and business sentiment are described as stable. Also in Hartford, a new apartment construction project recently broke ground downtown, and investment sales interest remains healthy.
Realtors in the First District expressed caution but optimism about the mixed sales results that continued in the region in February. Year-over-year sales of single-family homes decreased in both Massachusetts and Connecticut, but in the condominium market, sales increased relative to last year in both of these states.
Most, but not all, retail and manufacturing contacts reported higher sales and revenues over the year-ago period, though some still cited adverse effects from the harsh winter weather.
