The overall view of the Federal Reserve’s Beige Book — the Summary of Commentary on Current Economic Conditions by Federal Reserve District — noted that commercial real estate lending was “subdued.”
Retail businesses generally found “further increases in price sensitivity among consumers, as well as several reports of increased sensitivity to quality,” so keeping an eye on how retail tenants are doing might not be a bad idea.
Some regions had additional details, whether directly about CRE or indirectly through other industries. In Boston, there were software restaurant sales as consumers held back on spending. Retail sales were also “moderately weaker.” CRE was “flat on average.” Industrial leasing slowed somewhat, and rents for that category were down “modestly.” Multifamily rents were up “moderately.” Investment demand was up and planned multifamily construction was “on the rise,” but many towns and cities were resistant to additional buildings. According to some sources, the office market “was hitting bottom” in leasing and some underperforming office buildings will likely default.
Recommended For You
In New York, CRE markets “steadied after a period of weakness," the book said. The office market in New York City saw demand grow. Office tenants are looking closely at owners’ financials, as long-term solvency is a big concern. There was more demand for commercial mortgages.
The office market struggles for a new equilibrium in the Philadelphia region. The buildup of new multifamily properties created more options for renters and an increase in incentives. In the Cleveland region, nonresidential construction increased modestly, and some projects are coming off hold and getting ready to start. Richmond reported flat CRE activity. Prime office spaces are seeing falling vacancies, but lower-grade markets have growing vacancies.
Atlanta’s multifamily markets saw rising vacancies and demand responded to concession offers. Industrial was slow but stable. Non-bank lenders saw increased delinquencies.
Chicago experienced increases in construction with a focus on data centers, light advanced manufacturing, and QSR. CRE activity in St. Louis softened slightly due to lower demand. The big challenges are policy uncertainty, interest rate levels, volatility, and elevated insurance costs. Retail and office haven’t seen enough absorption so new construction has slowed in those areas.
There are big projects in Minneapolis that keep companies with them in good shape. Those that lack them are “struggling.” New projects out for bid have been softer and a lot of companies are hungry for work. CRE was flat and smaller businesses that maintain space or add more don’t change the overall picture “when big companies give back hundreds of thousands of square feet," according to the book.
CRE investor sentiment has improved in Kansas City, but the rising trend of delinquencies isn’t over. Loan demand was low because of higher interest rates and rate volatility. Dallas saw mixed CRE activity. Apartment demand was solid and yet because of excess supply that built up, recent concessions “remained prevalent," the Fed said. Office leasing picked up but only in class A space.
And in San Francisco, CRE activity was unchanged on balance. Office vacancies were elevated, and leasing of new office space was low. Retail and industrial demand was “solid.”
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
