Northeast: Rising Tide in the East

The Northeast continues to report a lower jobless rate than any other region. This has helped residents reflect a more positive economic outlook than people in other regions

ECONOMIC OVERVIEW

Dipping to eight percent in April 2011 from 8.9 percent in April 2010, according to the U.S. Department of Labor's Bureau of Labor Statistics, the Northeast's unemployment rate has experienced a much-needed reprieve this year.

JOBLESS RATE

Compared with the national jobless rate of 9.1 percent in May 2011 (which, though up, was nonetheless down from 9.8 percent in April 2010), the Northeast's economy appears to be recovering at a slightly faster clip than the rest of the country.

Within the region, there's a mix of bad news reports, such as Connecticut (9.1 percent) and Rhode Island (10.9 percent), and good—New Hampshire (4.9 percent), Vermont (5.3 percent), and Pennsylvania (7.5 percent).

BUILDING CONFIDENCE

As unemployment woes waned in parts of the Northeast, consumer confidence has been on the rise. In May 2011, a full 31 percent of consumers said they were “confident” or “very confident” about the chances for a strong economy during the next six months, according to the BIGresearch Consumer Intentions & Actions Survey. What a change from May 2008, when a mere 18.4 percent felt “confident/very confident.”

In addition, according to BIGresearch, just 4.2 percent were concerned with being laid off in May 2011, less than half of the 9.67 percent who were worried about losing jobs two years earlier.

SPENDING OUTLOOK

Nearly four out of 10 (38.8 percent) consumers in the Northeast report that they have become more budget conscious in the past six months. And, over 27 percent said they plan to decrease their overall spending in the next three months (up from 26 percent in May 2010).

COST OF GOODS

As consumers became more cost conscious, the Northeast's Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) rose by 2.8 percent for the 12-month period ending in April, according to the BLS. In comparison, the overall U.S. CPI rose only by 0.4 percent.

RETAIL REAL ESTATE

Declining unemployment rates and a more positive outlook for the future of the economy have bolstered the retail real estate market in the Northeast, with lower vacancy rates at a time when commercial real estate rentals are floundering nationwide. Still, asking rents remain on the decline in this region.

VACANCY RATES

The Northeast experienced lower retail vacancy rates for commercial real estate in the first quarter of 2011 than any other area, which is primarily due to the fact that it is a hub for major metros. With a reported vacancy rate of 8.9 percent, the region was a full two percent lower than the overall U.S. vacancy rate of 10.9 percent for the same period, according to Reis, Inc., a New York City-based firm that provides forecasts in the retail real estate market.

“In the Northeast, between the end of last year and the first quarter of this year, vacancy rates did decline slightly, by .2 percent,” says Ryan Severino, a senior economist with Reis, Inc.

And, while average Northeast region rents rang in at $18.75 per square foot (PSF) in 2007, this number dipped down to $17.97 in 2010, according to Reis, Inc.

METRO MARKETS

The Northeast has a few standout metros. According to The CoStar Retail Report from the CoStar Group, the Albany/Schenectady/Troy, New York, retail market boasted a vacancy rate of 4.8 percent and rental rates of $11.25 per square foot (PSF) in the first quarter of 2011. Similarly, the Boston market experienced a five percent vacancy rate (down from 5.9 percent in the first quarter of 2010). This market came in with much higher asking rents of $15.09 PSF.

New York City had a mere 2.2 percent vacancy rate and asking rents of $65.20 PSF, which was actually a decrease from the first quarter of 2010.

In Pennsylvania, the Pittsburgh retail market finished off for the the quarter with a vacancy rate of 5.4 percent, down from the previous quarter. Also indicating a strong market in this metro was a PSF asking rent of $15.78, an increase over the previous quarter. “Pittsburgh is the model city for how to reinvent yourself after your economy declines,” says Severino. “This is one of the markets that didn't really go through a housing boom/bust cycle, so they're not contending with that, either.”

FASHION TRENDS

The hub of all things fashion, the Northeast will see its consumers jump on their own interpretations of the fall season's key style trends, including bright colors, ladylike dressing, fur accessories and accents, and a return to vintage inspiration.

CASUAL/STRUCTURE

“We might see spots of color in weekend clothes for men and women in the Northeast, including colored denim,” says Roseanne Morrison, fashion director at The Doneger Group. She notes that the more conservative Northeast won't embrace the color trend as strongly as the South and West but, “We'll definitely see more structured fabrics in the East.”