BOSTON – Business activity continued to expand in the First District in recent weeks, according to the Federal Reserve Beige Book report released Wednesday.
The First District includes all of New England, except Fairfield County in Connecticut.
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Commercial real estate activity was mixed in the First District. Boston and Hartford contacts reported a “modest softening” of commercial leasing activity in recent weeks, while activity was somewhat stronger in Providence.
“In Boston, reports of slower demand pertained to the urban office sector, which still enjoyed a single-digit vacancy rate. Investor demand for prime Boston properties remained strong but price appreciation slowed further,” the report said.
Office construction activity continued to be “restrained” across the district, the report said.
Most contacts expect further improvements in their respective commercial real estate markets moving forward, but probably at a slower pace. A Providence contact was more optimistic, saying that business confidence in Rhode Island had improved recently.
An inventory shortage continues to affect residential real estate markets in the First District, the report said. All six First District states, as well as the Greater Boston area, reported large declines in inventory for both single-family homes and condominiums from February 2016 to February 2017. Closed sales also declined in every state and Boston for single-family homes. Results for condos were mixed.
Buyer demand remains strong, and most contacts were confident that it would remain that way, despite increasing interest rates.
A contact in Boston said, “Sales could have been much stronger had the inventory been up. Unfortunately, we’ve noticed that potential sellers have become more reluctant to list their homes because they are apprehensive that they may not be able to find another home themselves.”
Contacts were not surprised that prices generally rose year over year. For single-family homes, median sales price rose in each state except Connecticut. For condos, prices rose in all reporting regions.
Bloomberg News reported that across the country, the economy also continued to grow at a modest-to-moderate pace in recent weeks as a tight labor market helped broaden wage gains, though consumer spending was mixed.
The central bank’s Beige Book economic report is based on anecdotal information collected by regional Fed banks covering mid-February through the end of March; it also showed that household purchases outside of automobiles were softer even as Americans were gaining more wherewithal for future spending.
The report paints a picture of an economy maintaining its steady expansion, without a rapid pickup that would reflect the surge in confidence among consumers and businesses. At the same time, underlying growth might not be as weak as some estimates indicate.
The Beige Book is typically released two weeks before each interest-rate setting meeting.
The Fed’s Beige Book, in noting the difficulty of many firms in finding the right workers, detailed the challenges of a respondent in the Boston district who had to eliminate two-thirds of applicants who didn’t pass math and drug tests. Restaurant contacts in the same region expressed worry that changes to U.S. immigration policy would exacerbate labor shortages for summer hiring.
Bloomberg News contributed to this report.
