Metros split between job gains, losses; multifamily, industrial property indexes rise

Posted by tED magazine on Monday, December 12, 2011

Click here to view October metro employment tables.

Nonfarm payroll employment increased from October 2010 to October 2011 in 233 out of 372 metropolitan areas, decreased in 133 and remained the same in six, the Bureau of Labor Statistics (BLS) reported on Tuesday. Construction employment increased in 140 of the 337 locations for which BLS provides data (including divisions of larger metro areas), declined in 146 and held steady in 51, according to an AGC analysis released on Monday. (The data are not seasonally adjusted and include mining and logging with construction in metros with few employers in one of those industries.) The largest 12-month percentage gains in construction employment were in the Lake County, Illinois-Kenosha County, Wisconsin division of the Chicago metro area (28%, 3,500 construction jobs); followed by Casper, Wyoming (22%, 600 construction jobs). The Houston-Baytown-Sugar Land metro area added the most (5,100 construction jobs, 3%); followed by Columbus, Ohio (4,200 combined jobs, 15%); Buffalo-Niagara Falls (3,600 combined jobs, 18%); and Lake County-Kenosha County. The steepest percentage losses were in Logan, Utah-Idaho (-24%, -800 combined jobs); Wilmington, North Carolina (-21%, -1,900 combined jobs); and Redding, California (-20%, -600 combined jobs). The largest number of job losses occurred in Atlanta-Sandy Springs-Marietta (-7,700 construction jobs, -8%); Tampa-St. Petersburg-Clearwater (-4,000 construction jobs, -8%); and New York City (-4,000 combined jobs, -4%).

The Multifamily Production Index (MPI), which “tracks the sentiment of builders and developers about the conditions of the multifamily market on a scale of 0 to 100, increased from 44 in the second quarter to 47 in the third quarter—the highest reading since the fourth quarter of 2005,” the National Association of Home Builders (NAHB) reported on Thursday. “The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse. In the third quarter of 2011, the MPI component tracking builder and developer perceptions of market-rate rental properties recorded an all-time high of 64, while low-rent units remained steady at 50. For-sale units rose to 32, the highest recording since the second quarter of 2006….Looking forward to the next six months, builder and developer expectations improved in the third quarter for market-rate rental properties and for-sale properties, up to 67 and 37, respectively. Expectations for low-rent units decreased slightly, to 50.”

“The Society of Industrial and Office Realtors, in its SIOR Commercial Real Estate Index, an attitudinal survey of 231 local market experts, shows the broad industrial and office markets were relatively flat in the third quarter,” the National Association of Realtors reported on November 28. “Even so, the SIOR index, measuring the impact of 10 variables, rose 0.6 percentage point to 55.5 in the third quarter, following a decline of 2.6 percentage points in the second quarter. In a split from the recent past, the industrial sector advanced while the office sector declined. The SIOR index is notably below the level of 100 that represents a balanced marketplace, but had seen six consecutive quarterly improvements before the last two quarters. The last time the index reached the 100 level was in the third quarter of 2007. Construction activity remains low, with 96% of respondents indicating that it is lower than normal; 88% said it is a buyers’ market in terms of development acquisitions. Prices are below construction costs in 83% of markets.”

“Developers in Southern California’s Inland Empire are moving forward with…eight speculative warehouse buildings…totaling about 4.8 million square feet, according to commercial real-estate brokerage Jones Lang LaSalle Inc.,” the Wall Street Journal reported on Wednesday. “Elsewhere in the country, industrial leasing is recovering much more slowly, if at all. Vacancy remains high compared with the boom years, and construction starts are way down, according to data from CoStar Group Inc. ‘Overall, in most markets, rents cannot justify spec development,’ says John DiCola, head of investments at KTR Capital Partners, a New York-based private equity firm that builds and acquires industrial real estate. ‘We don’t expect to see it in most markets.” The Census Bureau reported on December 1 that spending on general commercial warehouses rose 12% in the first 10 months of 2011 from the same period in 2010.

New orders from U.S. manufacturers (excluding semiconductor manufacturers) fell for the second straight month in October, by 0.4%, seasonally adjusted, the Census Bureau reported on Monday. Orders for construction materials and supplies rose 3.0% after two consecutive decreases of 1.7%. Orders for construction machinery rose 3.2% in October, following a 21% jump in September and a 17% plunge in August.

“Data from 48 early-reporting states shows collections from major tax sources increased by 7.3% percent in nominal terms in the third quarter of 2011 compared to the same quarter of 2010,” the Rockefeller Institute of Government (www.rockinst.org) reported on Thursday. “This is a noticeable slowdown from the 10.8% year-over-year growth reported in the second quarter of 2011. Tax collections now have been rising for seven straight quarters, following the five quarters of declines that were brought on by the Great Recession….Overall state tax revenues have recovered to pre-recession figures. Most states have not yet returned to peak levels, however, because those levels came several months into the Great Recession.” All but three of the states reported gains from year-ago levels. However, most states are spending more than before on Medicaid and other income-support programs and on state employee pension plans, leaving less for construction.

The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved