Office Market Suffers Little from Offshoring

The Torto Wheaton report concludes, however, that "Despite arguments to the contrary, offshoring to India and China does not appear to have had a significant impact on the unemployment rate." The report, authoredby economist Umair Shams, cites statistics suggesting that offshoring''s effects on the economy—including loss of jobs—"has been very minimal, if not insignificant." The study of office space absorption figures "suggests that offshore outsourcing has no significant impact on demand for office space," the report states.

The Torto Wheaton study looks at a recent study of offshoring to the emerging economies of India and China between 1996 and 2005 and how that offshoring has affected the business, professional and technical Services (BPT) sector of the US economy. The study found that exporting BPT services had some effect on unemployment, but the effect was small. "The results also highlight the strength of US BPT service exports, which continue to perform well, even relative to China and India—countries that are often seen as competitive threats to the US because of their increasingly skilled but low-wage labor pool," the Torto Wheaton study notes. In fact, between 1988 and 2007 the BPT sector has typically run a trade surplus, despite increases in offshoring.

One of the conclusions from the statistical study is that any loss in jobs due to offshoring from the US "should be at least offset by jobs created through foreign demand for services," Torto Wheaton's research shows. But it also points out that some US jobs are lost due to offshoring. Official data on job losses due to offshoring has been difficult to obtain, but in 2004 the Bureau of Labor Statistics began tracking this in its Mass Layoff Statistics program.

The Bureau of Labor Statistics report includes layoffs from all non-farm private employers, but does not break down the data by employer type, which is crucial to know in order to determine the effect on real estate demand. A breakdown of employer type would provide detail on which office employment sectors lost jobs due to offshoring. Even though such data is not available, "Some very useful insights can be taken away from the BLS results," Torto Wheaton says.

For example, of the mass layoffs since 2004, some 64,657 were due to jobs being moved to other countries. In the same period, the national economy created a net 2.7 million new jobs. "The jobs that have been lost due to offshoring, then, are only a very small fraction of the labor force and of jobs created," the Torto Wheaton study concludes.

The study advises that, when considering the effects of offshoring, "It is important to look at both sides of the equation. US employees might be at risk of losing jobs to low-wage destinations like India and China, but foreign companies still demand high-tech US services, which has the potential to create jobs at home. "This should help ease any investor concerns about offshore outsourcing causing job losses and eventually losses in demand for office space at home," the study says.