WASHINGTON (MNI) – The following is the second and final part of
the text the Boston section of the Federal Reserve’s Beige Book report
on current financial conditions released Wednesday:
Software and Information Technology Services
New England software and information technology firms report
increased activity through the end of Q4 2010 and into Q1 2011.
Year-over-year revenue increases range from 3 percent to 25 percent in
the most recent quarter, with most in the double digits. Contacts report
increased demand for software and IT services from the industrial,
medical, and education sectors, although some corporate clients remain
unwilling to finalize deals. Increased activity has led most respondents
to increase their headcounts; indeed, two plan to grow their staff by 10
percent in 2011. Wages continue to trend upward, with most I-3
respondents awarding annual increases in the 3 percent to 5 percent
range. Selling prices are steady, and two contacts observe less
discounting pressure than a year ago. Capital and technology spending at
contacted firms is relatively unchanged. The outlook among software and
IT services respondents is generally positive, with most expecting
steady or faster revenue growth in 2011.
Staffing Services
New England staffing contacts report that the upward trends of 2010
are continuing. Revenues are flat to increasing year-over-year, with
increases in the range of 5 percent to 20 percent. Labor demand has
generally increased, with notable improvements in the manufacturing,
information technology, and medical sectors. Higher activity is also
reported in the legal sector, with increased demand for paralegals and
business support personnel. Conversions from temporary to permanent
hires continue to strengthen, and a few contacts report an uptick in
permanent placements. Labor supply is tightening somewhat in the region,
especially at the high end, with most contacts reporting increasing
difficulty finding qualified candidates for high-skill jobs. The
downward pressure on bill rates seen throughout the first half of 2010
has lessened and pay rates are holding steady. Looking forward, First
District staffing contacts are generally optimistic, predicting that the
rest of 2011 will bring continued growth.
Commercial Real Estate
The latest reports indicate that commercial real estate
fundamentals in New England are either stable or moderately improving,
depending on the location. In Hartford, vacancy rates and rents are
roughly unchanged since the last report; job growth and associated
office demand are currently sluggish, but are expected to improve by
summer 2011. In greater Boston, vacancy rates were little changed,
leasing volume held steady, and office rents edged up slightly, bouncing
back from the trough of the recent downturn. Loan terms for greater
Boston properties loosened slightly amid increased competition by
lenders. The outlook among Boston contacts is for modest, if not rapid,
growth and improvement in office and retail fundamentals in the coming
months. In Providence and Portland, limited leasing activity in January
was attributed to bad weather and contacts expect slow yet positive
absorption of commercial space in 2011. Construction activity is limited
across the region, with the exception of the multifamily sector and
various small-scale rehab projects in the Boston area.
Residential Real Estate
Residential real estate results were mixed across New England in
December, with some states experiencing year-over-year sales declines
while others saw modest increases. Home sales continued to decline
significantly in Rhode Island, Connecticut, and Maine, while
Massachusetts and New Hampshire posted modest increases in sales volume
compared with a year ago. Contacts in Massachusetts and New Hampshire
note that part of the increase in year-over-year sales stems from
especially weak sales in I-4
December 2009, attributable to the (initial) expiration of the
homebuyer tax credit in November 2009. Nonetheless, contacts throughout
the region note an increase in activity in the past month and express
cautious optimism about 2011.
Compared with a year earlier, the median price of homes moved
upward in December throughout the region except in Massachusetts, where
the median price decline was the first in over a year. Contacts
anticipate sales declines for the early months of 2011 as a result of
recent snowstorms. Pending sales of homes and condos in Massachusetts
fell in January compared with a year ago.
Contacts throughout the region expect modest increases or flat
sales in 2011. However, some note that 2011 comparisons with sales in
the first six months of 2010 may be misleading, as home sales in that
period were boosted by the homebuyer tax credit.
– end – 2 of 2 –
** Market News International Washington Bureau: 202-371-2121 **
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