Construction spending increased 0.7% in October to $802.3 billion at a seasonally adjusted annual rate, but was down 9.3% from October 2009, the Census Bureau reported today. Census revised down the September and August estimates. Monthly gains appeared in public construction (up 0.4% for the month and 2.2% year-over-year); power (8.8% and -3.9%); private transportation such as trucking, rail and airline investments (2.7% and -2.6%), new private multi-family (3.2% and -33%); and private improvements to existing residential property (6.2% and -11%). Total private residential spending increased 2.5% for the month but fell 9.2% over 12 months, as new single-family construction slipped 1.2%, the sixth straight monthly drop, and 3.0% year-over-year. Despite the monthly increases in power and transportation, private nonresidential spending slumped 0.7% for the month and 21% year-over-year, with yearly declines in all 11 Census components.
“Reports from the 12 Federal Reserve Districts indicate that the economy continued to improve, on balance, during the reporting period from early/mid-October to mid-November,” the Fed stated today in the latest “Beige Book,” a summary of informal soundings of business conditions in the 12 districts, which are referred to by their headquarters cities. “Economic activity in the Boston, Cleveland, Atlanta, Dallas and San Francisco Districts increased at a slight to modest pace, while a somewhat stronger pace of economic activity was seen in New York, Richmond, Chicago, Minneapolis and Kansas City. Philadelphia and St. Louis reported business conditions as mixed….Manufacturing activity continued to expand in most Districts….The Philadelphia and Dallas Districts indicated little improvement in demand for manufacturers with ties to residential housing and construction….Residential real estate and construction activity remained at a low level in all Districts. The Philadelphia, Atlanta, St. Louis, and Minneapolis Districts reported some further weakening in home sales. Boston, New York, and Richmond characterized the market as soft; while Cleveland, Kansas City, Dallas, and San Francisco described the market as sluggish. The Chicago District reported that high inventories of unsold homes continued to be a drag on new residential construction and home prices….The rental market continued to offer incentives to tenants in New York, while strong demand for rental units was reported in Richmond and Dallas. Outlooks for 2011 were mixed. Conditions in the commercial real estate industry were mixed during the reporting period. Several Districts reported flat demand and high vacancy rates, which translated into limited nonresidential construction activity. The New York, Atlanta and Kansas City Districts noted some weakening in nonresidential activity, while the Boston and Dallas Districts indicated some modest improvement in commercial real estate. Reports from Cleveland and Chicago noted that most new projects fell generally into the infrastructure category. Contacts in Boston, Richmond, Kansas City and Dallas expressed some optimism about the near-term outlook in their Districts, but contacts in several other Districts expressed a more cautious outlook.
“Preliminary tax collection data for the July-September quarter of 2010 show continued improvement in overall state tax collections,” the Rockefeller Institute of Government reported on Tuesday. The “Institute’s compilation of data from 48 early-reporting states shows collections from major tax sources increased by 3.9% in nominal terms compared to the third quarter of 2009, but was 7.0% below the same period two years ago. Gains were widespread, with 42 states showing an increase in revenues compared to a year earlier.” Revenue declined from the year-earlier quarter in Alaska by 48% (“partially attributable to declines in oil and gas production taxes”); Hawaii, 14% (“mostly attributable to delayed state income tax refunds for tax year 2009”); Louisiana, 7.5%; South Dakota, 3.1%; Virginia, 1.5% (“due to the accelerated sales tax program in fiscal 2010, which required dealers to remit July payments in June 2010”); and Alabama, 0.5%. No data were reported for Nevada or New Mexico. Falling receipts often lead to construction cutbacks; however, rising receipts may not produce an increase in construction spending until other programs are funded. For instance, the District of Columbia, which is not included in the Rockefeller Institute analysis, is facing a $185 million shortfall in fiscal 2011 and a $345 million gap in fiscal 2012. Mayor-elect Vincent Gray “said he was freezing all capital projects that were not yet underway while ‘a blue-ribbon panel of experts’ reviewed which were necessary,” the Washington Post reported on November 23.
A quarterly analysis of five rental property types in more than 50 metro areas released on Tuesday by Dividend Capital Research found that occupancy rates increased for all five in the third quarter and rents were mixed. Specifically, office occupancy inched up 0.1% but rents declined 0.3% from the second quarter and 2.7% from a year before. Industrial occupancy edged up 0.1% but rents fell 0.7% and 5.9%, respectively. Apartment occupancy climbed 0.2% and rents rose 0.6% for the quarter but fell 0.3% annually. Retail occupancy rose 0.4% but rents dropped 0.7% and 4.0%. Hotel occupancy jumped 1.1% but revenue per available room fell 0.5% for the quarter, while rising 9.2% year-over-year. No markets improved enough to warrant new construction.
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