by Calculated Risk on 6/13/2007 05:29:00 PM

From the Fed's Beige Book:

The real estate and construction industries were marked by continued weakness in the residential sector and increasing strength in the commercial sector.

The surprise here is the increasing strength in the commercial sector. IMO, continued strong investment in commercial real estate (CRE) is one of the keys to avoiding a recession later this year.

There was widespread improvement in commercial real estate markets in recent months. More than half the Districts reported that leasing activity was picking up in most of their major markets and vacancy rates were falling. Boston, New York, Philadelphia, and San Francisco also mentioned increases in office rents. Four Districts (Philadelphia, Richmond, Minneapolis, and Dallas) reported strong demand for industrial space, especially warehouse space. Chicago, on the other hand, reported that industrial development was sluggish. All the Districts that mentioned commercial construction activity gave positive reports.

Recent reports have indicated that vacancy rates were rising, so, if vacancy rates are falling again, this is a significant positive for continued investment in CRE.