Nonagricultural employment in the eight States in the region dropped by approximately 1 percent between March 2001 and March 2002. Employment declined in every State except Kentucky, where the increase was less than 1 percent. The region’s worst decline was in Georgia, which dropped 2.8 percent, or 111,500 jobs. The Atlanta metropolitan area suffered job losses of 70,500, or 3.2 percent, from March 2001 to March 2002. Reflecting reduced needs for office space in the face of layoffs, the metropolitan area experienced negative absorption of more than 750,000 square feet of space in 2001. Office vacancy rates, including sublease space, now exceed 20 percent. The unemployment rate in the region was 5.5 percent for March 2002, compared with the national rate of 5.7 percent.

In South Carolina, the Department of Commerce reported that capital investments in the State totaled nearly $5.28 billion in 2001 and generated 21,937 new jobs. Approximately 30 percent of the new capital investment and jobs created were in underserved and underdeveloped rural areas, where many local economists believe that the State has the greatest potential for growth. Existing industries accounted for $3.53 billion in investment and 15,600 jobs of the 2001 total. This suggests that the State is successful not only in attracting new business but also in sustaining a positive business climate.

Hyundai Motor Company decided in March to build its first U.S. plant on a 1,600-acre site in Montgomery, Alabama. The $1 billion plant, expected to open in March 2005, will employ at least 2,000 and make approximately 300,000 vehicles a year. Two major announcements during the first quarter of 2002 suggest some progress in diversifying North Carolina’s traditional manufacturing job base. AW North Carolina, Inc., manufacturer of transmission components for Toyota, will expand its Durham facility, creating up to 450 new jobs and $160 million in investment. Flextronics will locate their key East Coast design and manufacturing facility in Youngsville, creating 1,500 new jobs over 3 years and investing $20 million in Franklin County.

Despite a weaker economy, low mortgage rates continued to support the region’s single-family housing market. Permits for single-family units in the first 3 months of 2002 were up 9.7 percent over the same period in 2001. Activity was particularly strong in Florida, where the number of units permitted went from 27,066 to 32,637, a 20.6-percent increase. Except for Miami-Fort Lauderdale and Gainesville, metropolitan areas in Florida experienced an increase in permit activity. The 6-percent decline in the Miami area is probably an adjustment to the production surge of 2001, when permit activity reached its highest level since 1989. The Florida Association of REALTORS® reported that existing home sales in the State through February were up 10 percent from the first 2 months of 2001.

Multifamily activity for the region was down through March, with the total number of units permitted decreasing from approximately 27,600 in 2001 to approximately 26,200 in 2002. Half of the States experienced increases and half decreases. Significant declines occurred in Alabama, North Carolina, and Tennessee. In North Carolina, the number of units permitted was 2,999 through March compared with 4,290 for the same period last year. Markets in North Carolina are struggling with a weak economy and the effects of overbuilding. Data available from Carolinas Real Data indicate that the rental markets in the Raleigh and Charlotte metropolitan areas weakened in 2001, with overall vacancy rates for both areas exceeding 12 percent.

In Atlanta’s rental market, occupancy slipped in 2001 as job losses curbed demand at the same time that a large number of new units came on the market. Recent surveys in the metropolitan area indicate an occupancy rate of approximately 90 percent, a decline of more than 4 percentage points in the past year. Substantial concessions, such as 2 months’ free rent on a 1-year lease, have become commonplace, and several developments reduced rents in the face of weak market conditions.

In the first quarter of 2002, multifamily production in the Orlando area was about even with the very low levels of the first 3 months of 2001. Activity for the 12 months ending in March 2002 was 32 percent below that of the same period in the previous year. Rental occupancy continues to decline throughout the metropolitan area, with some areas becoming extremely soft. According to a March 2002 survey of 140,700 units conducted by Charles Wayne Consulting, Inc., overall apartment occupancy fell to 89 percent and in some areas was as low as 83 percent. It appears that the weakness in the rental market is not confined to areas that are economically dependent on tourism.

In the Biloxi-Gulfport-Pascagoula metropolitan area, multifamily building permits were issued for 233 units in the 12 months ending in March 2002, approximately 20 percent of the number issued in the previous 12-month period. During the 1998–2000 period, the number of units permitted averaged 1,097 a year. The November 2001 survey of the Mississippi Gulf Coast apartment market by the University of New Orleans Real Estate Market Data Center showed that overall occupancy was 92.8 percent, down slightly from 93.1 percent in November 2000. However, nearly 2,000 units were in initial lease-up and were not included in the survey results. The reduced level of apartment construction activity is expected to boost occupancy in 2002 as excess product is absorbed.

Rental market conditions in the Memphis metropolitan area continued to soften in 2001 as the result of the large number of units that began construction in 2000. CB Richard Ellis of Memphis reported overall vacancy of 11.4 percent in apartments in the fourth quarter, with more than 2,800 units currently in initial lease-up. Vacancy rates are particularly high in the Cordova/Germantown area and DeSoto County, Mississippi, where much of the new construction is concentrated.

Multifamily rental housing development, assisted by the Federal Low Income Housing Tax Credit (LIHTC) program, showed important gains in Puerto Rico. The Puerto Rico Housing Finance Corporation placed 619 units in service during 2001 and allocated an additional 1,627 units for 2002 and 2003. Approximately 1,442 of the total 2,246 units will be located in the San Juan metropolitan area.