Employment growth in the Mid-Atlantic region during the 12 months ending in May 1997 reflected the improved performance in Maryland, Pennsylvania, and Virginia economies. Employment gains in the major metropolitan areas of the region ranged from a low of 0.9 percent in Pittsburgh to a high of 1.8 in the Washington metropolitan area.

In the Washington area, employment in suburban Maryland increased by more than 2 percent in the 12 months ending in May 1997 due in part to State and local economic incentive programs to retain and attract jobs. In Northern Virginia a 3.4-percent employment growth rate continued to be fueled by expansions in the telecommunications and information-technology sectors. The Center for Innovative Technology in Northern Virginia estimates that up to 19,000 jobs in computer-related occupations at average salaries of more than $40,000 are going unfilled due to the lack of skilled personnel. Unless firms are able to find qualified workers, these jobs will be lost to other areas of the country. In response a number of State colleges and universities are developing programs to meet the need.

The market for sales housing generally remained steady. Existing home sales increased by only 1 percent in the Pittsburgh area in 1997 due to sluggishness in Allegheny County, which accounts for nearly 60 percent of all the area's activity. In the Baltimore area, existing home sales were down by 4 percent through May, and sales of new homes were down by 14 percent. The exception is the Washington area, where existing sales rebounded in 1997 in virtually all submarkets. Maryland suburban sales increased by 18 percent to date in 1997 due largely to gains in Montgomery County, where the I-270 high-tech corridor growth is fueling housing demand. In Northern Virginia sales of existing homes nearly doubled through May, with 1997 likely to be the best year for sales in this decade. So far in 1997, the close-in, high-volume Montgomery and Fairfax counties saw the biggest upturn in existing sales, especially for homes priced above $250,000. However, the available inventory is still extensive, especially on the Maryland side, and price appreciation has been nominal. New home sales have increased in the Washington area as well. As a result builder incentives are not as widespread as they were in 1996.

One of the biggest future housing developments in the Mid-Atlantic region has been planned for Alexandria, Virginia. More than 1 million square feet of warehouses and barracks are being demolished at the U.S. Army's former Cameron Station installation. The area will be redeveloped into a 2,500-unit residential community of condominiums, townhomes, and single-family homes priced from $120,000 to more than $350,000.

Single-family construction in the Mid-Atlantic region, as measured by building permits through June, totalled 48,384 homes, down 3 percent compared with the first half of 1996, due largely to a 10-percent drop in Maryland. Declining single-family construction in Maryland is due largely to a dropoff in activity in the Baltimore area.

Single-family permit activity in Virginia and Pennsylvania decreased by only 1 percent in each State to 18,428 units and 15,730 units, respectively. Activity for the first half of 1997 in the Philadelphia (6,330 units) and Washington (11,992 units) metropolitan areas was close to the 1996 volumes for the same period. At the current pace, activity in Washington is ahead of the pace set in 1995 and could surpass 1996's annual volume of 23,194 homes.

Multifamily permit activity in the Mid-Atlantic region during the first 6 months of 1997 totalled 11,356 units, a 19-percent increase compared with the first half of 1996. In Pennsylvania activity in the first 6 months of 1997 was equal to the total activity in 1991, which had been the best year of the decade. However, activity in Virginia fell 43 percent in 1997 after a very strong 1996. Apartment vacancy rates declined in the Pittsburgh area, prompting the construction of almost 1,000 units in 1996 and permits for more than 450 units in the first half of 1997. Baltimore, Pittsburgh, and Richmond all reported gains for the first half of 1997. In the Philadelphia area, the number of multifamily units permitted through June 1997 totalled 2,059; this is only slightly below the total activity for all of 1996 (2,162 units) and reflects a resurgence of apartment and condominium construction in the Philadelphia suburbs. Multifamily activity in the Washington metropolitan area during the first 6 months of 1997 was down to 1,894 units -- less than half the volume in the same period in 1996. The cutback was in response to the growing number of units under construction due to the large numbers of units permitted in 1995 and 1996, 6,000 and 8,000, respectively.

In the Washington area, activity in the seniors housing market is booming. Five communities are presently being developed that will eventually total about 9,000 units. These include 1,800 units in single-family homes and townhouses to be built in Haymarket, Virginia; 2,100 units to be built in Fairfax County; and 2,000 units to be built on the Occoquan River in Prince William County, Virginia, catering primarily to active, independent seniors. Leisure World is building condominiums in Loudoun County, Virginia, in a 2,100-unit community where absorption is keeping pace with construction. The company is also adding 1,000 units to its Silver Spring, Maryland, community. In addition, 16 assisted-living facilities for the frail elderly are in various stages of construction or planning in the Northern Virginia and Maryland suburbs.

Spotlight on Richmond-Petersburg, Virginia

Employment growth in the Richmond area has slowed to 1 percent annually during the past 18 months ending June 1997. The recent job gains are well below those of the period from 1993 to 1995, when 13,200 jobs were added each year -- a 2.8-percent annual rate of growth. Declines in State government employment (11 percent, or 4,600 jobs, since 1994) and manufacturing employment contributed to the slowdown. Gains in financial, business, educational, and medical services sectors have slowed as well.

During 1997 the market for commercial space has improved despite the slowdown in the economy. Class A office vacancies are less than 5 percent in the downtown area and less than 10 percent in the suburbs. The strongest sub-market was in the northwest, where more than 1.2 million square feet of office space were absorbed in 1996, the highest level since 1989.

Industrial vacancies in 1997 are in the 5-percent range, well below the 17-percent rate of 1991. More than half of the absorption of 800,000 square feet of industrial space in 1996 took place in the northeast quadrant near Richmond International Airport (primarily in bulk warehouse space), evidencing Richmond's growing appeal for regional distribution centers. Another 1.7 million square feet of speculatively built industrial space is under construction this year, mostly in the airport area. Construction at the White Oak Semiconductor (Motorola-Siemens) computer-chip plant in the same area is on schedule, with hiring and training of up to 1,500 production workers already under way.

The building and sales of new homes have been steady in recent years. Construction of new, single-family homes has averaged about 5,500 units each year since 1994, and the pace has continued in the first half of 1997. Permits were issued for 2,900 homes in the first half of 1997, which was almost identical to the volume for the same period in 1996. New home prices have been increasing about 5 percent annually since 1994, partly due to higher costs and partly due to construction of larger homes. In the first half of 1997, the average sales price for a new home was slightly less than $170,000. The number of new home sales has remained steady each year since 1994.

Henrico and Chesterfield counties account for more than half of the metropolitan area's single-family activity. In the Four Mile Run community of 260 homes -- one of the largest tracts to be developed in eastern Henrico County -- the price of each home is in the low $100,000 range. Planned communities, especially those built around golf courses, are popular in the high-income suburbs to the north and west. The golf-course lots are attracting people over 50 years old and retired persons. In suburban Hanover County, production of homes has increased from 700 units per year in the 1980s to nearly 1,000 homes annually from 1993 through 1997.

Existing home sales are down 10 percent so far in 1997 following a banner year in 1996. First-time buyers are supporting the existing market, particularly in the city of Richmond. Primarily through partnerships that include city block grant funds and construction and permanent mortgage loans through two State agencies and local banks, new affordable housing is being built in the city of Richmond in both east-end and south Richmond neighborhoods. Neighborhood associations and nonprofit groups are providing leadership, technical assistance, and citizen input. Other housing industry professionals are donating their services. The new units, which average about $70,000, serve primarily the first-time homebuyer in the $20,000-$30,000 income range.

The rental market has returned to a balanced condition, with vacancy rates in the 5- to 6-percent range. Multifamily construction reached 660 units in 1996 based on the number of units permitted -- the highest level since 1989. The market continues to show strength in 1997. Permits for 554 units were issued through June. New apartments, primarily in the northwest and southwest sections of the market area, are being absorbed as soon as they are completed. Typical rents for the new units are $600 or more for one-bedroom units and $800 or more for two-bedroom, two-bath units, excluding utilities. In addition to the typical recreational amenities, many new apartment buildings are now featuring business centers with computers and fax machines.

Extended-stay apartment suites have recently entered the Richmond rental market. Two facilities with close to 200 units have recently been completed close to new office parks in suburban Henrico County. The units are aimed at people relocating and business and professional travellers and offer full kitchens, living/dining rooms, and large bedrooms. Amenities include exercise rooms, laundry rooms, and pools. The average stay is 3 weeks, and the rent is $250 per week.