Fed Beige Book: CRE Activity Increased Slightly

by CoyDavidson on September 6, 2017

Overall Economic Activity

Economic activity expanded at a modest to moderate pace across all twelve Federal Reserve Districts in July and August. Consumer spending increased in most Districts, with gains reported for nonauto retail sales and tourism, but mixed results for vehicle sales. Capital spending also increased in several Districts. Manufacturing activity expanded modestly on balance. That said, reports were mixed regarding auto production, and contacts in many Districts expressed concerns about a prolonged slowdown in the auto industry. Both residential and commercial construction increased slightly overall. Low inventories of homes for sale continued to weigh on residential real estate activity across the country, while commercial real estate activity increased slightly. Activity in the energy and natural resources sector was generally positive prior to shutdowns arising from Hurricane Harvey. Agricultural conditions were mixed overall, with drought conditions reported in multiple Districts. Business and consumer loan demand grew at a modest pace in most Districts, with a number of banks reporting rising competition from both other banks and non-bank lenders.

Eleventh District – Dallas

The Eleventh District economy continued to expand at a moderate pace over the past six weeks. Manufacturing output strengthened, and activity in non-financial services increased. Growth in retail sales accelerated, in part due to a rebound in auto sales. Home sales rose slightly, but office leasing activity was mixed. Loan volumes expanded, while demand for oilfield services was flat. Crop conditions remained mostly favorable. Employment, wages and prices increased. Outlooks remained positive, although several contacts expressed concern that policy-related uncertainty would impact the broader economy.

Construction and Real Estate

Home sales were flat to up slightly over the reporting period. Contacts noted ongoing strength in sales of moderately-priced new homes; sales at the higher-price points softened, however. Buyers remained price-sensitive and were shopping more for deals. One contact said that some master-planned communities are adjusting lot sizes downward in future phases, to cater to the solid demand for moderately-priced product.

Apartment leasing remained active in Austin, but rent growth has moderated and incentives were being offered at the high end in submarkets, where competition was intense among new properties in the leasing phase. Activity in Dallas-Fort Worth remained strong, although contacts expect growth to moderate. Apartment demand firmed up in Houston following earlier weakness, and outlooks were positive, with contacts expecting continued, gradual improvement.

Office leasing activity stayed sluggish in Houston and vacancy rates were elevated, putting downward pressure on rents. Fundamentals in Houston’s industrial market were healthy given near-record-low vacancy rates. One contact noted that investor interest has picked up in Houston. Office and industrial leasing activity continued to be solid in Dallas-Fort Worth.

You might also like:

Get my posts via e-mail: here

Previous post:

Next post: