April 14, 2010
Federal Reserve Districts
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The Second District's economy has strengthened noticeably since the last report, though hiring remains sluggish; price pressures have increased moderately but prices at the consumer level remain stable. Manufacturing-sector contacts report improved activity. Auto dealers note some pickup in sales in March, following a lull in February, while general merchandise retailers report improving sales in both months. Tourism activity in New York City has strengthened further since the last report. Commercial real estate markets have been steady to slacker. Residential real estate markets, though still sluggish, have shown scattered signs of improvement, especially at the lower end of the market. Bankers report steady to weaker loan demand, higher delinquency rates (except on consumer loans), and tighter credit standards.
Tourism activity in New York City has continued to strengthen since the last report. Manhattan hotels report that business was relatively brisk in February and that preliminary indications for March show even more strength: occupancy rates have risen steadily and are estimated to be up 8 percentage points from a year earlier in March, despite an increase in the overall number of hotel rooms. Total revenue per room, which had been down more than 10 percent from a year earlier in late 2009, was estimated to be up 6 percent in March. Similarly, Broadway theaters report a noticeable pickup in business since the last report, following a weather-related lull in early February: March revenues were up 16 percent from a year earlier, while attendance rose 9 percent. Separately, The Conference Board reports that consumer confidence among residents of the Middle Atlantic states (NY, NJ, Pa) slipped in February but rebounded in March, to just below a two year high.
Construction and Real Estate
Manhattan's housing market remains sluggish, though there are signs of stabilization, especially in the rental market. Co-op and condo sales transactions were reported to have doubled in the first quarter from the depressed levels of a year earlier but were still down modestly from the 4th quarter of 2009. Prices were also down modestly for the quarter and continued to run roughly 20 percent below a year earlier, with milder declines on studio and 1-bedroom apartments but steeper price drops on larger units. Manhattan's apartment rental market showed further signs of stabilizing in March: rents edged up and were down just 1½ percent from a year earlier, though vacancy rates rose modestly.
Commercial real estate markets were steady to softer since the last report. Manhattan's office vacancy rate continued to climb in the first quarter, though at a more subdued pace than in 2009; asking rents for Class A properties continued to run 20-25 percent lower than a year earlier. Still, a contact at a major brokerage firm notes a pickup in leasing activity and sees signs of stabilization in Midtown, though not in Downtown. Looking at the surrounding areas, office vacancy rates continued to drift down in Long Island, were steady in northern New Jersey, but continued to rise in Westchester and Fairfield Counties. Asking rents were down moderately (3 to 6 percent) in these markets. Office vacancy rates in most of upstate New York remain relatively stable--up a bit in the Buffalo and Rochester areas but down modestly in the Albany area. Asking rents are relatively steady in the Buffalo and Albany areas but down 3-8 percent from a year ago in metropolitan Rochester and down more steeply in the Syracuse area. Industrial (factory and warehouse) markets slackened throughout most of the District, with vacancy rates rising and rents falling. A real estate developer in the Buffalo area notes that commercial development and construction are increasingly sparse and that credit remains exceptionally tight.
Other Business Activity
Looking at business conditions more generally, contacts outside the manufacturing sector continue to describe conditions as stable or rising modestly. However, manufacturing contacts in the District note improved conditions since the last report. A trucking-industry contact reports some pickup in business in recent months, though conditions remain weak. There are scattered reports of shortages of truck drivers--partly due to more stringent requirements for commercial drivers' licenses.