Northeast: Building confidence

The outlook is slightly more positive in the Northeast than in other areas in the nation, with buyers reporting hope for economic recovery and planning on some pleasure spending

ECONOMIC OVERVIEW

The Northeast continues to boast the lowest jobless rate of any region. This is giving its residents a slightly more positive outlook on economic recovery than other regions.

JOB LOSS

The region's unemployment rate clocked in at 8.9 percent in April 2010, which was slightly lower than the country's overall jobless rate of 9.5 percent, according to the Bureau of Labor Statistics (BLS). Some states in the region had even lower unemployment rates, such as Vermont with 6.4 percent, New Hampshire with 6.7 percent, and New York with 8.4 percent. It was the tiny state of Rhode Island that tipped the scales in the other direction, with a jobless rate of 12.5 percent.

Philadelphia

BASTION OF HOPE

With hope in sight, residents of the Northeast are feeling more confident than most other regions about the future of the economy. According to BIGresearch, 33.1 percent of those surveyed in this region in April 2010 felt “Confident/Very Confident” about the chances for a strong economy in the next six months. That's a marked increase over 21.4 percent a year earlier. Additionally, only 3.3 percent of people surveyed in this region were concerned with being laid off compared with 8.5 percent in April 2009.

SPENDING OUTLOOK

A more hopeful outlook here has enabled Northeasterners to feel better about loosening their purse strings. Just 44.3 percent say they have become more budget conscious, according to the BIGresearch survey, while 56.6 percent say they are focusing more on what they “need” versus what they “want.” Nearly 32 percent say they plan to decrease their overall spending in the next three months, but those who will spend on a big dollar purchase plan to do so on vacation travel (16.9 percent), a television (9.3 percent), or computer (12 percent).

COST OF GOODS

The Northeast's Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) actually rose slightly by 0.2 percent in April, while the overall U.S. CPI declined by 0.1 percent. The increase in this region is attributed to higher prices for energy and food.

New York

RETAIL REAL ESTATE

Low unemployment, higher confidence levels, and a heartier attitude toward spending have positively affected the commercial real estate market here, which is exhibiting lower vacancy rates and higher asking rents than other areas.

VACANCY RATES

The Northeast fared better than any other region with retail vacancy rates—in the first quarter of 2010, it revealed a nine percent vacancy rate, which was almost two points lower than the overall U.S. rate of 10.8 percent during the same period.

While the Northeast appears less affected by the economic downturn and its fallout, Ryan Severino, an economist with Reis, Inc., a New York City-based retail real estate forecaster, warns, “Every region of the country has seen vacancies increase and rents decline.”

He does, however, point to reasons why this region is looking better than others. “The markets that hold up better are those that are a little more dense and affluent, such as the Northeast and the West,” he says. “Philadelphia, New York, and Boston have the highest concentrations of the wealthiest, most affluent people in country, so demand will be higher there.”

New Jersey

RENTS

The wealthier (and less budget-conscious) population here has also enabled retail real estate rents to remain higher than those in other regions. In the first quarter of 2010, asking rents averaged out at $20.29 per square foot in the Northeast, according to Reis, Inc. This number is only slightly lower than the asking rent reported here in the first quarter of 2008, which was $20.60 per square foot.

METRO MARKETS

A hub of major metros, the Northeast has staying power even in a down economy. Still, there are few urban centers in particular that are worth keeping an eye on.

CITIES TO WATCH

While Boston boasted a low vacancy rate of 5.9 percent, its rental rates remained on the decline—they fell to $15.40 per square foot in the first quarter of 2010. Still, this city was home to one of the country's top retail building sales in the country, which sold for nearly $6 million.

The market of Long Island ended the quarter with an impressively low 4.5 percent vacancy rate. This area also saw nearly 246,000 square feet of new retail space delivered; another 1.2 million is still under construction here.

Just down the road in New York City, where vacancy rates are historically low (ringing in at 2.5 percent for the first quarter of 2010), one of the top U.S. building sales took place the first quarter of the year. The original Lord & Taylor building sold for $24.6 million.

Northern New Jersey and Philadelphia are two more of the most active retail construction markets in the country and are both considered hotspots to watch.

FASHION TRENDS

While the Northeast is still recognized as the epicenter of fashion, the style focus here is decidedly more dressed up.

■ SHARP. “It's about being a little bit sharper,” says Rita Nakouzi, director of Promostyl Americas, a trend forecasting service based in New York City.

“People here always take it a notch up. I notice I have to tone it down a little whenever I travel to other parts of the country,” she adds.

■ DRESSY. As such, trend-focused Northeasterners will embrace the zipped-up, dressed-up ladylike looks that are coming into play for the Fall 2010 season. This style direction heralds a return to suiting and minimalism.

“We saw a lot of black, beige, and camel plus a lot of fur and leather on the runway,” says Nakouzi. “We will see who embraces these looks in the different regions of the country.”