White collar jobs in San Jose are a beacon of good news for the local office market, which has been rocked by the pandemic. A report from Marcus & Millichap has found that stability in tech sector jobs will pave the way for new hiring in secondary positions, ultimately supporting recovery in the office sector. However, there are still several stormy quarters ahead first.
The Marcus & Millichap report forecasts 41,900 new jobs created this year in the San Jose market, with payrolls increasing by 3.9%. Several companies are playing a role in the job growth. During the pandemic, tech companies retained a large share of their staff, and office-using companies were able to maintain staff levels within 1% of pre-recession numbers at the end of the first quarter this year.
Many companies are in the process of bringing employees back into the office or establishing new in-office work policies. Apple and Google are both in the middle of this process, but once complete, leisure and hospitality jobs that support these businesses are sure to follow. In fact, the latter industries are expected to drive the majority of new job growth this year.
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Although the report anticipates healthy job growth, the San Jose market will likely close the year down 60,000 jobs compared to the peak in 2019. This is putting pressure on the office market. This year, office vacancy will likely increase 250 basis points, driving rents down 2.3%. This follows an already downward trend from 2020, when the vacancy rate increased 340 basis points year-over-year and rents decreased 1.9%.
Many experts are following office-using job growth as an indication of the office recovery. Last year, a report from Newmark tracked office-using job recovery, and found that 30% of private sector office-using jobs lost in second quarter were recovered by the end of the third quarter, and the 15 largest office markets in the country have seen the strongest recovery in office-using jobs. Overall, professional and business services were driving the recovery, while the financial sector was recovering the fastest. In terms of geographic markets, Seattle and Dallas led the country in job recovery. At the time, the report also found the recovery of these jobs to be an indication of strong office recovery in the long term.
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Kelsi Maree Borland
