The Federal Reserve Bank in Washington DC

WASHINGTON, DC--Worries that the trade war will affect the US economy peppered the most recent release of the Federal Reserve's Beige Book, with the word tariffs being mentioned 31 times in the 32-page report (Reuters did the counting).Other problems highlighted in the report include shortages of skilled workers and growing costs of raw materials. “Shortages were cited across a wide range of occupations, including highly skilled truck drivers, specialized construction and manufacturing workers, IT professionals and truck drivers,” the report said.Commercial real estate, for its part, was influenced by some of these trends as well -- in one case a developer said it was using drones to survey property to make up for the lack of skilled workers.That said, overall commercial real estate market conditions have been stable or improving in recent weeks, according to the Beige Book.Following are excerpts about the state of commercial real estate in the Fed's 12 districts.

New York

Effective rents are flat to down modestly across New York City, though demand for larger rental apartments has picked up recently--reportedly reflecting both rent reductions and a shift away from homeownership.

Philadelphia

Overall, nonresidential real estate contacts reported no change in the modest growth in leasing activity. However, as several major projects reach or near completion in Philadelphia, there has been a slow and steady decline in labor hours from previously high levels of construction activity.

Cleveland

Nonresidential builders noted that the strong demand of recent periods continued in the current period and that backlogs ticked higher as firms struggled with labor constraints. Capital investment plans were mostly unchanged, although one commercial builder stated that the firm boosted spending to use drones for surveying to make up for the shortage of workers. There was some concern that demand from industrial clients could weaken depending on the course taken by trade disputes.

Richmond

New commercial office construction was soft, despite reports of some build-to-suit projects. Agents said that office and retail landlords were offering fewer incentives and concessions had tightened. Vacancy rates remained low across sub-markets, and a few brokers noted a lack of available product.

Atlanta

The majority of commercial contractors indicated that, on balance, the pace of nonresidential construction activity at least matched the year-ago level, with the exception of multifamily construction which was characterized as unchanged to down. Most contacts reported a healthy pipeline of activity, with backlogs greater than or equal to the previous year.

Chicago

Commercial real estate activity increased modestly, led by growth in the industrial sector. One contact noted that demand for office space from technology firms was strong. Commercial rents increased modestly, vacancy rates declined modestly, and the availability of sublease space increased slightly.

St. Louis

Commercial real estate activity has been unchanged since the previous report. Contacts in Little Rock reported that the market is generally healthy across most property types but were apprehensive over how future interest rate increases may impact profits and cash flows.Commercial construction activity was flat. Some contacts in Little Rock expressed concerns that new hotel construction underway risks over-saturating the market. A Louisville contact reported continued robust multifamily construction.

Minneapolis

In Minneapolis-St. Paul, multifamily vacancy rates continued to be low despite strong delivery of new units to the market, though lease rates have been mostly steady. Despite the continued closure of large retail stores in Minneapolis-St. Paul, this space was being absorbed and "keeping vacancies tight," according to an industry source.

Kansas City

The commercial real estate sector grew at a moderate pace as absorption, completions, and sales rose while vacancy rates declined. Commercial real estate activity was projected to expand at a slightly faster pace moving forward.

Dallas

Contacts expressed trepidation about the impact of rising interest rates and uncertainty surrounding trade and immigration policies on future activity and/or costs. Nevertheless, outlooks remained positive.A large number of new apartments are putting pressure on rents, particularly in areas where there was a lot of availability. Rent growth in Dallas and Austin was modest and below its long run average, though occupancy was generally holding up well. A slowing pace of deliveries combined with a pickup in economic growth has boosted occupancy and rent growth in Houston. Investment activity remained solid despite the recent softening in overall performance.Net absorption in DFW's office market improved in the second quarter but remained modest compared with the highs seen last year. Office leasing activity was steady in San Antonio, but remained sluggish in Houston. Conditions in industrial markets were characterized as solid, and reports on demand for retail space mostly indicated flat but healthy levels of activity.

San Francisco

Activity in real estate markets expanded at a solid pace. Construction in the residential market was strong, constrained only by the shortage of labor and rising material costs. In Oregon, construction starts for industrial and warehouse spaces picked up noticeably, as did leasing demand for these spaces. Contacts in Southern California reported that commercial rents and sales prices increased moderately.