From the Federal Reserve:
Construction and Real Estate
Commercial real estate markets in the District were mixed in the first quarter. New York City’s office market continued to deteriorate, with vacancy rates climbing to a 4-year high at the end of March and asking rents on Class A space falling 14 percent from a year earlier. A major commercial broker cites a huge increase in available sub-lease space, mostly from financial service firms. In contrast, office markets in outlying areas were steady to slightly stronger in the first quarter: vacancy rates and asking rents were little changed in northern New Jersey, Westchester and southwestern Connecticut; in Long Island, vacancy rates improved to a 3-year low, while rents edged higher. Similarly, office markets in upstate New York showed resilience: office vacancy rates declined in the Buffalo and Syracuse areas and were little changed in metropolitan Rochester and Albany; rents were little changed across the board. The purchase market, however, is still reported to be exceptionally sluggish throughout most of the District.
The rental market for industrial space was steady to softer in the first quarter, as was the market for retail space. Manhattan’s retail market softened more than others: while vacancy rates were steady at low levels, asking rents declined sharply for the second straight quarter, and a relatively large volume of new retail space is due to be completed in the fourth quarter of 2009, much of it still unleased.
Housing markets have continued to weaken in much of the District since the last report–particularly in the multi-family segment. New York City’s rental market continued to soften in March: asking rents in Manhattan were estimated to be down just 5-6 percent from a year earlier, but with the growing prevalence and size of concessions (waiving of rental fees, 1-3 months free rent, etc.), effective rents have reportedly fallen much more sharply–especially in full-service buildings. The inventory of rental listings has continued to increase, particularly in non-doorman buildings; one large brokerage firm reports that the rental vacancy rate has nearly doubled over the past 12 months. Manhattan’s apartment sales market deteriorated markedly in the first quarter: the median sales price for condo re-sales was down 16 percent from a year earlier, while co-op prices fell 22 percent. The number of sales transactions fell nearly 50 percent from a year earlier, while the inventory (number of units listed) jumped 34 percent. Moreover, an industry contact maintains that there is a sizable “shadow” inventory of apartments–new condo units that are unsold but not yet listed. While quarterly data are not yet available for other parts of New York City, Brooklyn’s market has reportedly slackened to an even greater extent than Manhattan’s, largely due to a huge supply of newly constructed units.
The market for single-family homes has been mixed but generally weaker since the last report. A New Jersey industry consultant notes that resale activity, though still sluggish, picked up a bit in March–even after accounting for seasonality–but only on properties with fairly steep price reductions. However, a real estate broker in northern New Jersey maintains that traffic has been unusually quiet in recent weeks. Both contacts estimate that prices are off about 20 percent from their peaks, on average, and note that much of the activity is in “short sales”, where the mortgage holder agrees to forgive part of the debt to the extent that it exceeds the selling price. Real estate contacts in upstate New York indicate somewhat more favorable market conditions. Home prices in the Buffalo-Niagara Falls area have reportedly remained steady thus far in 2009, though sales activity has fallen roughly 20 percent from 2008 levels. Contacts in both upstate New York and northern New Jersey note that the new tax credit for first-time home buyers has spurred at least some interest among potential buyers. Industry contacts throughout the District indicate that new home construction is running substantially lower this year than in 2008.