X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

NEW YORK CITY-Despite the devastation in the financial services sector, other types of service occupations offer hope for US office markets, according to analyses by a number of sources that track the impact of job growth and job losses on the nation’s office markets. While the housing market and the financial crisis have dominated commercial property concerns recently, Torto Wheaton Research says “the success story of service sector firms in office markets has been overlooked.”

There is even evidence that economic activity in some parts of the non-manufacturing sector grew in August, according to the nation’s purchasing and supply executives, who were polled in the latest Non-Manufacturing ISM Report on Business, a monthly report issued by the Institute for Supply Management. The institute, which tracks growth in the service sector, reports industries like mining, healthcare, social assistance, educational services, professional services and scientific services grew slightly in August, the latest month for which figures are available. The ISM cautioned, however, that some industries reported a slowing in August, including transportation and warehousing, finance and insurance, wholesale trade and retail trade.

Torto Wheaton’s analysis says the present downturn differs from the recession of 2001 when “many of the technology-oriented e-commerce and services firms were not profitable, let alone revenue-generating.” This time around, analysts say service sector firms are reporting healthy profits.

Since the early 1990s, service employment growth has generally outpaced other categories of employment and “has played an increasingly important role in leasing demand and rent growth,” Torto Wheaton’s report points out. Services’ share of total office employment has risen from 66% of total office employment in 1990 to 71% today.

The upshot of the ISM report and other studies, according to the reports’ authors, is the services sector is broad-based enough that it can absorb the job losses in housing- and finance-related industries. The reports don’t paint a rosy picture by any means, but they point out that the services sector in general has been stable even where it has lost jobs.

A report by JPMorgan Global Services, for example, notes “conditions in the global service sector are still relatively subdued overall as weaker client confidence, a by-product of ongoing credit and financial market volatility, continues to suppress demand.” However, there are signs that the activity levels in the services sector are stabilizing, JPMorgan’s team says, adding stable activity should mean stable levels of employment.

While markets with high concentrations of financial services firms are bound to suffer, the reports on the services sector say, office markets with high concentrations of business services and information employers will suffer considerably less. Of course, the studies also mention the service sector is only one part of the economy and that employment figures in general have been worsening, which is bound to have some effect on office markets.

In California, for example, unemployment rose for a fifth straight month to 7.7% in August, the highest rate in more than 12 years and in a state that until recently had weathered the economic troubles well. California’s unemployment rate was tied with Mississippi’s as the third worst in the nation. The national unemployment rate is 6.1%.

But the services sector constitutes a steadily growing portion of the economy, suggesting a long-term demand for office space. In fact, the importance of service sector jobs to the office market is part of what the US Bureau of Labor Statistics describes as part of “a long-term shift from goods-producing to service-providing employment” in the US economy. That shift is expected to continue, according to the bureau, which estimates service-providing industries will account for about 15.7 million new wage and salary jobs from 2006 through 2016. At the same time, manufacturing industries will register a net loss of jobs, the bureau says.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.