Spring has sprung and the economic outlook in the First District is relatively optimistic, according to the Federal Reserve’s latest Beige Book report.
Contacts across most sectors in the First District, which includes all of New England except for Connecticut’s Fairfield County, told the Fed of year-over-year increases in business activity and minimal price pressures.
According to this Beige Book, the First District’s commercial real estate market is largely unchanged since the last report in April. Office leasing activity in Boston is stable, with very strong demand for space in the Seaport District, Back Bay and Kendall Square. Some contacts told the Fed that some new apartment buildings in Boston seem to be having difficulty achieving hoped-for rents and occupancy levels, which they attributed to a large number of high-end units coming onto the market in a short period of time.
Office leasing fundamentals are steady in Hartford, the Fed said. Construction activity in the area also increased over last year in the multi-family and mixed-use sectors, driven partially by state and local funding and tax credits.
Contacts in the residential real estate market expressed generally positive sentiments in discussion with the Fed in spite of March data indicating year-over-year declines in single family home sales and in median sales price for single family homes in four of the six states.
Respondents attributed those declines to inventory shortages, weak employment security and uncertainty concerning changes to flood maps and flood insurance legislation. The Fed’s contacts emphasized lack of inventory as the main constraint in Massachusetts, and although inventories are beginning to expand in parts of that state as new sellers enter the market, inventory shortages cannot be resolved without new construction, they told the Fed.
Contacts in Connecticut also told the Fed of a need for additional units, particularly in the first-time homebuyers market. Those contacts said multiple bids have begun to occur and that developers are beginning to build. In Connecticut, as in Maine, short sales and foreclosures continue to be released to market, partially contributing to the decline in median sales prices.
First District manufacturers reported generally strong business conditions. Of the 13 firms contacted this cycle, 12 reported higher year-over-year sales and the one firm with a decline attributes the slow sales to weather and says that underlying sales growth is exceptionally strong. Contacts’ only serious concerns involve international sales, and new products drove growth for many companies.
