Wage growth has outpaced inflation for 32 consecutive months, helping make apartments more affordable and supporting demand across commercial real estate sectors, according to John Chang, chief intelligence and analytics officer at Marcus & Millichap.
Through January, average hourly earnings increased by 3.7% year-over-year, compared with inflation of 2.77%, Chang said. This marks total wage growth of 12.4% since December 2022, compared with a 9% increase in the Consumer Price Index.
"That translates to a significant gain in income for workers, even when accounting for rising costs," Chang noted.
Using the apartment market as an example, he said that for a full-time employee, the 3.7% wage increase equated to roughly $230 more per month, while rents rose only 1.5%, or about $28 per month. Since the second quarter of 2023, apartment rents have increased by about $66 per month, while wages for full-time employees increased by a little over $700 per month on average, indicating that housing has become more affordable relative to income.
Chang said this rise in discretionary income has bolstered consumer spending, retail sales and savings.
"Some consumers are under pressure, I have no doubt about that," said Chang. "But on average, American households' ability to fuel consumption and economic growth remains positive."
He noted that higher discretionary income supports demand in multifamily, retail and industrial property sectors.
Looking ahead, Chang emphasized that continued wage growth and relative housing affordability are key factors sustaining commercial real estate fundamentals, even amid ongoing economic uncertainties such as interest rate pressures or uneven consumer sentiment.
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