AGC members feed the Fed (information)

The Federal Reserve provided an unusually detailed - and grim - commentary on conditions in commercial real estate and nonresidential construction in the July 29 "Beige Book," so called for the color of its cover. The Beige Book is issued eight times a year, in advance of meetings of the Federal Open Market Committee, and is a summary of informal soundings of business conditions in the 12 Fed districts, which are referred to by their headquarters cities. AGC members often contribute to those soundings.  "Commercial real estate leasing markets were described as either "weak" or "slow" in all 12 Districts, although the severity of the downturn varied somewhat across Districts. While the office vacancy rate was up and rents were down in the Dallas District, market fundamentals there remained stronger than the national average. Market conditions in the New York District are significantly worse than one year ago, on average, but have been relatively stable in recent weeks and some parts of the District report improving fundamentals. Office vacancy rates continued to climb in the Atlanta, Boston, Kansas City, Minneapolis, Philadelphia, Richmond and San Francisco Districts, as well as in Manhattan, resulting in sizable leasing concessions and/or declines in asking rents. Significant weakness in the retail leasing sector was reported for the Boston, Minneapolis, and New York Districts, and industrial vacancy increased in the Atlanta, Dallas, Minneapolis, and St. Louis Districts. Commercial real estate sales volume remained low, even "non-existent" in some Districts, reportedly due to a combination of tight credit and weak demand. Construction activity was limited and/or declining in most Districts, although exceptions were noted for health and institutional construction in the St. Louis District, public sector construction in the Chicago District, and the reconstruction of the World Trade Center in Manhattan. Tight credit was cited as an ongoing factor in the dearth of new construction activity. The commercial real estate outlook was mixed, both within and across Districts. Some contacts expect commercial real estate markets to improve within two quarters and others predict further market deterioration for the remainder of 2009 and possibly through late 2010. AGC members have been very helpful in keeping the Fed informed through a variety of channels about demand for construction, availability of credit, materials costs and other issues. Many members have replied to questions that Fed economists have asked me to pass along. Some AGC members have served directly on Federal Reserve Bank boards, and Colorado Chapter members recently met with the chair of the Denver branch of the Kansas City Fed. I have made presentations on industry conditions to Chairman Bernanke, other governors and staff at the Board of Governors in Washington, and to luncheon meetings held at several of the banks.