NEW YORK CITY-The Federal Reserve said Wednesday in its latestBeige Book that the tristate region’s economy has strengthenedfurther since its last report in mid-April, noting particularlythat commercial real estate activity in the New York City metroarea has picked up lately. The Fed’s report comes as CB RichardEllis says Manhattan’s leasing volume during May spiked by morethan one million square feet over the previous month.

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“Leasing activity, which was very depressed throughout most of2009, has picked up noticeably since the beginning of this year andis now back up to ‘normal’ levels,” according to the Fed. Itnotes that much of the recent pickup has come from legal firms“and, to a lesser extent, from business services, media, andgovernment agencies. In contrast, there has been a dearth of newleasing by financial firms.”

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Nonetheless, the Fed says the metro area’s vacancy ratescontinue to edge up, “as businesses tend to be taking less spacethan they had at prior locations.” The trend is belied, however, byManhattan’s office vacancy rate, which has declined for twoconsecutive months.

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CBRE’s Manhattan Market Snapshot for May, released earlier thisweek, showed a 275% year-over-year increase in office leasingvolume from the monthly total of 970,000 square feet a year ago.It’s also up 1.07 million square feet from April’s tally of 1.61million feet, CBRE says. The island’s overall vacancy rate tickeddownward from 9.6% to 9.3%, while its availability rate alsodeclined slightly from April to 13.9%.

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Yet on the question of asking rents, CBRE’s snapshot forManhattan is consistent with the Fed’s summation for the metroarea: that prices “continue to drift down but appear to bebottoming.” There was a modest month-over-month drop of 55 centsper square foot to $47.58. Manhattan’s average ask has declinedsteadily each month from $54.63 per square foot a year ago.

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The Fed says that housing sales for the Second District, whichincludes all of New York State as well as Northern New Jersey andsouthwestern Connecticut, have been “steady to somewhat firmersince the last report, especially at the lower end of the market.”In Manhattan’s co-op and condominium market, activity has leveledoff after a modest pickup in the first quarter, the Fed says.

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Retailers have reported strong sales for April but “mixedresults” for May, according to the Beige Book. That dovetails witha report from the Conference Board noting that consumer confidenceamong residents of New York, New Jersey and Pennsylvania retreatedslightly in May after reaching a two-year high in April.

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Formally known as the "Summary of Commentary on Current EconomicConditions," the Beige Book is published eight times per year. EachFed bank—in this case, the Federal Reserve Bank of New York—gathersanecdotal information on current economic conditions in itsdistrict through reports from Fed directors and interviews with“key business contacts, economists, market experts and othersources.”

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.