WASHINGTON (MNI) – The following is the second and final part of
the text of the Boston section of the Federal Reserve’s Beige Book
report on current financial conditions released Wednesday:
Commercial Real Estate
Across the region, contacts report that commercial leasing activity
remains modest, especially in the office sector where job growth has
been tepid. The Hartford office market shows very light leasing activity
and negligible absorption. In Providence, office leasing volume was also
very light, but rents are said to be firming up. Office leasing activity
in Boston is described as slow-to-moderate, and some say recent activity
is slower than in the first quarter. Boston deals consist largely of
tenant renewals, resulting in little net absorption. The biotechnology
and pharmaceuticals sector in Boston is seen as comparatively dynamic,
generating strong demand for office space in Cambridge and planned new
construction in Boston’s waterfront area. In Portland, activity is flat
for the most part, although at least one significant office leasing deal
was signed. Investor interest in apartments remains strong in Boston,
with some contacts expressing concern that sales prices are getting too
high; interest in prime office properties also strengthened in Boston.
The lending environment for commercial real estate is described as
increasingly favorable to borrowers. The outlook among contacts is
cautiously optimistic. All expect at least slow growth in office and
retail demand for the remainder of 2011 and some see potential for
significant improvement in market conditions by early 2012, although a
few mention risks posed by fiscal conditions and related political
uncertainty at both the state and national levels.
Residential Real Estate
Residential real estate markets throughout New England experienced
significant declines in sales and median prices in April compared to a
year earlier. Contacts attribute the sales declines to the homebuyer tax
credit, which boosted sales for the first half of last year. Condominium
sales fell during the same period, and the median price of condos
slipped across much of the region. Most contacts see job security as a
significant hurdle in the recovery of the residential real estate
market. Several contacts also note that stricter lending requirements
among large banks have shrunk the potential pool of homebuyers. In
general, contacts report that potential buyers are anticipating further
price declines and sellers continue to price homes competitively in
order to find a buyer quickly. While overall market activity remains
weak, respondents see some improvement in the medium to high-end
segments of the market.
Contacts throughout the region expect year-over-year declines to
continue for the next few months because of last year’s homebuyer tax
credit. Although several contacts believe that much of the New England
real estate market has begun stabilizing, they caution that a lengthy
recovery still remains.
-end- (2 of 2)
** Market News International Washington Bureau: 202-371-2121 **
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