October 12, 2006
Federal Reserve Districts
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The Second District has shown signs of strengthening since the last report, with few signs of increased price pressures. Labor markets have been steady to stronger, according to firms in manufacturing and most service industries. Manufacturers report steady growth in activity since the last report, along with less widespread increases in input prices. Retailers indicate that sales picked up in September, while prices remained flat. Tourism activity remained robust in New York City, with both hotels and Broadway theaters reporting double-digit increases in prices over the past year. Consumer confidence in the region rose to a five-month high in September.
Housing markets have been mixed since the last report: New York City's co-op and condo market has remained fairly strong, and the rental market has tightened further; however, housing markets in New Jersey and upstate New York show continued weakness. Commercial real estate markets across the New York City metro area generally strengthened in the third quarter, for both office and industrial space. Finally, bankers again report weakening in loan demand--particularly for home mortgages--somewhat tighter credit standards in the commercial sector, and little change in delinquency rates.
Tourism activity has been fairly steady at a high level since the last report. The occupancy rate at Manhattan hotels edged up to 87 percent in August, slightly higher than a year earlier, while room rates climbed more than 10 percent from comparable 2005 levels. Broadway theaters report mixed results for September: attendance was down roughly 3 percent from a year earlier, but total revenue jumped 11 percent, reflecting sharply higher admission prices. Based on the Conference Board's survey of Middle Atlantic (New York, New Jersey and Pennsylvania) residents, consumer confidence, which had drifted down in July and August, jumped to a 5-month high in September.
Construction and Real Estate
In contrast, Manhattan's co-op and condo market showed signs of resilience in the third quarter. Based on quarterly data from a leading appraisal firm, both the number of apartments sold and the price per square foot were up roughly 6 percent from a year earlier, despite a sharply higher inventory of available units. Manhattan's rental market has tightened further since the last report, particularly at the high end, reflecting a dearth of large rental units on the market at the end of the third quarter; a major real estate firm estimates that rents on studio and one bedroom apartments are up 5 to 10 percent from a year earlier, while rents on larger units are up 10 to 15 percent.
Commercial real estate markets across the New York City area showed further signs of tightening in the third quarter. In Manhattan, office vacancy rates continued to edge down, reaching their lowest levels since early 2001, while asking rents accelerated, rising more than 10 percent from a year earlier. One industry contact notes that large blocks of space have become nearly impossible to find in Midtown Manhattan. In the nearby suburban markets, vacancy rates were also down from a year earlier and at or near cyclical lows, though rents increased more moderately. The industrial market has been mixed but, on balance, stronger in the third quarter: vacancy rates declined to cyclical lows in Long Island, Westchester and Fairfield Counties, but continued to rise in northern New Jersey.
Other Business Activity