New orders for U.S. manufactured goods (excluding semiconductor manufacturing) fell 0.8% in August, seasonally adjusted, after four consecutive monthly increases, the Census Bureau reported on Friday. Orders for construction materials and supplies rose 0.6% in August, following increases of 0.8% in July and 1.7% in June. Orders for construction machinery, a normally volatile series, tumbled 23% in August after gains of 9.6% in July and 11.5% in June.
Purchasing executives at nonmanufacturing organizations reported slight growth in activity in September, the Institute for Supply Management (ISM) reported on Monday. "The five industries reporting growth [in the] composite index-listed in order-are: utilities, health care & social assistance, retail trade, construction and wholesale trade."
Retail, office and apartment vacancies and rents all worsened in the third quarter, according to data from Reis Inc., reported in stories this week in the Wall Street Journal. The paper reported today, "10.3% of the retail space at U.S. shopping centers-open-air centers typically anchored by a grocery store or big-box retailer-was vacant in the third quarter. That was up from 8.4% in the same period a year earlier and was the highest vacancy rate since 1992. At enclosed malls, the vacancy rate rose two percentage points to 8.6%, the highest rate since Reis began tracking mall data in 2000."
On Wednesday, the Journal cited Reis's estimate that "Nationwide, effective office rents fell 8.5% in the third quarter compared with the same period a year ago, the steepest year-over-year decline since 1995...The decline came as companies returned a net 19.6 million square feet of space to landlords in the third quarter, slightly more than in the second quarter. For the first three quarters of this year, the net decline in occupied space totaled a record 64.2 million square feet, the highest so-called negative absorption recorded since Reis began tracking the data in 1980. The vacancy rate, meanwhile, hit 16.5%, a five-year high...Vacancies are highest in areas with poor housing markets and industrial cities. They are approaching historic highs in Southern California, Las Vegas, Phoenix, southwest Florida, Detroit, Dayton, and Hartford. Other cities, including Dallas and other parts of Texas, and Atlanta, are seeing high vacancy rates largely as a result of overbuilding. Rent declines were steepest in big cities with large financial sectors, which saw the greatest run-up in rents in 2006 and 2007. They include Seattle , New York and San Francisco . But the office market deteriorated broadly across virtually all regions: Of the 79 metro areas that Reis tracks, office vacancies rose in 72 of them and effective rents declined in 68 of them."
On Monday, the paper cited Reis in reporting, "Apartment vacancies hit their highest point since 1986, surging in cities from Raleigh to Tacoma...The U.S. vacancy rate reached 7.8%, a 23-year high...in the top 79 U.S. markets. The rate is expected to climb further in the fall and winter, when rental demand is weaker, pushing vacancies to the highest levels since Reis began its count in 1980. Meanwhile, the air leaving the market is driving rents down, most sharply in markets that had been chugging along until a year ago, when unemployment accelerated, including Tacoma, San Jose and Orange County, California . Nationally, effective rents have fallen by 2.7% over the past year...During the third quarter, vacancies increased in 42 markets, improved in 26 markets and remained unchanged in 11 markets. Omaha saw the largest rise in vacancies, with the rate rising 1.1 percentage points to 7.4%. Other big rises were seen in Memphis, Indianapolis, Raleigh and Tacoma....Apartment owners ultimately could gain from the housing bust because the U.S. home-ownership rate has fallen as foreclosures rise. But the housing bust has also flooded some of the most overbuilt housing markets with new apartment inventory as developers have converted unsold condominium developments into rentals. Reis projects that the vacancy rate will peak at well above 8% in mid-2010."
Revenue per available room (revpar), a key measure of hotel demand, fell 15-17% in September compared to September 2008, Smith Travel Research reported today in a preliminary estimate, following decreases of 15% in August, 13% in July and 12% in June. Marriott International reported today that revpar in its North American operations fell 19% in the third quarter compared to the year-ago quarter. "Marriott added 79 new properties (10,380 rooms) to its worldwide lodging portfolio in the 2009 third quarter, including over 8,600 North American limited-service rooms....The company expects to open 25,000 to 30,000 rooms in 2010 as most hotels expected to open are already under construction or undergoing conversion from other brands."
On September 23, Marriott disclosed that "it will stop developing new time-share and luxury-residential projects and write down the value of such properties under construction by $760 million," the Journal reported on September 24. "'This business, at least for the next 10 years, is going to remain permanently shrunk,' said Joseph Greff, a gambling and lodging analyst for J.P. Morgan Securities, speaking of the time-share and luxury-residential markets in general."
"After a six-year building frenzy that transformed [Las Vegas], casino companies are shifting strategies dramatically toward slower growth, paying down debt and cutting back on spending," the Journal reported on Monday. Many casino executives don't expect to break ground on another major building project in Las Vegas for at least 10 years....In the place of new buildings, the casinos and the Las Vegas Convention and Visitors Authority say they are working to create more special events."
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