Latest Beige Book Shows Moderate Growth

The U.S. Federal Reserve has released the latest Beige Book, more formally called the Summary of Commentary on Current Economic Conditions, which indicates that economic activity increased at a modest pace in most regions of the country since the previous Beige Book report. Fed policymakers are widely seen raising interest rates for the first time in almost a decade at their next meeting on Dec. 15-16, but continue to parse data and trends carefully given the uneven nature of the U.S. recovery.

"On balance, economic and financial information received since our October meeting has been consistent with our expectations of continued improvement in the labor market," Fed Chairwoman Janet Yellen said in prepared text for a speech to be delivered in Washington today. "Continuing improvement in the labor market helps strengthen confidence that inflation will move back to our 2% objective over the medium term." A summary of the commercial real estate sectors follows:

Commercial construction strengthened modestly in most Districts since the previous report. The Minneapolis District saw continued strong growth, particularly in cities where commercial permitting increased. The Boston, Cleveland, Atlanta, Chicago, St. Louis, and San Francisco Districts reported moderate commercial construction growth. In the Boston District, office construction grew modestly in the greater Boston region. Demand remained strong in commercial building, multi-family housing, and higher education in the Cleveland District, while in the Atlanta District, non-residential construction was slightly up from a year ago and reports on apartment construction remained robust. The Philadelphia, Richmond and Kansas City Districts reported a modest pace of growth in commercial construction. Commercial construction increased in most major cities in the Richmond District. In contrast, New York reported little change since the previous report. The Dallas District reported that construction remained active, although construction started to taper off in Houston.

Commercial leasing activity generally grew at a moderate pace. Cleveland reported strong growth, while activity in the Districts of Boston, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas and San Francisco expanded at a moderate pace. Commercial real estate improved in the Atlanta District, with increased absorption and rent growth across property types. Improvement in the Chicago District was widely distributed across the retail, industrial, and office segments, with increased demand for both sale and lease properties. Contacts in St. Louis reported slightly higher demand across all sectors, and expected demand to remain the same or increase slightly in the first quarter of 2016. The Minneapolis-St. Paul retail, office, and industrial space had positive net absorption, along with lower vacancy rates. Demand for commercial leasing increased mildly in the Dallas District, while office space activity was strong in the Dallas-Fort Worth area. Commercial leasing activity in New York was unchanged since the previous report.

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