"Anything that would stimulate the economy to provide job growth is ultimately good for most forms of real estate ownership," president Guy Johnson of Irvine-based Johnson Capital told GlobeSt.com recently in an interview concerning the possible effects of the federal economic stimulus program. As Johnson pointed out, the office sector needs jobs to fill buildings, the multifamily sectors needs jobs to enable renters to stay in their apartments and retail needs jobs so that consumers feel confident spending.

While there is little that real estate leaders can do directly to affect job growth, some of the solutions that industry leaders are turning to are designed to cope with the impact of rising unemployment. Apartment management specialist Western National Property Management, for example, recently launched a program that allows renters who lose their jobs to cancel their leases without penalties. As Western National president Tom Shelton explained to GlobeSt.com at the time of the launch, the program not only offers peace of mind to renters who may be hesitating to sign a new lease or a renewal, it also is designed to reduce the number of tenants who simply run out on their leases or have to be evicted when they lose their jobs and can't pay rent. Reducing the skips and evictions thus will help Western National return those units to its inventory and rent them to someone else.

On a statewide level, the California Association of Realtors recently launched a mortgage protection plan for first-time home buyers that allows first-time home buyers who lose their jobs due to layoffs may be eligible to receive up to $1,500 per month, for six months, to help make their mortgage payments. The Realtors' association's Housing Affordability Fund is dedicating $1 million toward the mortgage protection program and estimates that up to 3,000 families will benefit from the program this year.

Commercial real estate experts say that parsing out how much property values have fallen because of job cuts is a difficult if not impossible task because job cuts are just one of the factors dragging down values right now. As New York City-based Real Capital Analytics points out in its latest report on property sales, the volume of sales has slipped so much and so few deals are trading these days that values are difficult to establish. In addition, factors like the increased number of distressed assets coming onto the market and the limited availability of financing are also a drag on values.

Some idea of the relationship between jobs and CRE can be found in the latest quarterly outlook for Southern California from Delta Associates in conjunction with Transwestern. Los Angeles County continues to maintain one of the lowest office vacancy rates in the nation as of the first quarter of 2009, although the rate has risen steadily since the end of 2007. However, "LA County is shedding jobs, causing demand for office space to wane and rental rates to decline," the report states.

At the time of the Delta Associates report, the LA Basin economy had lost 251,700 payroll jobs over the previous 12 months, with Los Angeles losing the most, 111,000 jobs. Employment in the Inland Empire declined by 76,100 over the 12 months, and Orange County shed 64,600 jobs. The report forecasts an annual average loss of 58,000 jobs through 2011 in the Los Angeles Basin, compared to 14-year average growth of 63,000 jobs per year in Los Angeles, suggesting that CRE and other industries will need to continue formulating strategies to cope with job losses for the next several years.

Instant Insights /

CRE Adjusts to Cope With Job Losses

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