NEW YORK CITY—Earlier this week, economists took a wide-angle view of the latest US employment figures. Training their sights more specifically on commercial real estate, a trio of industry economic experts—Ken McCarthy with Cushman & Wakefield, Hessam Nadji with Marcus & Millichap and Kevin Thorpe at DTZ—sees mainly positive news in recent hiring trends for a variety of commercial property sectors.
During April, “Employment in the three office-using sectors—financial services, information and professional and business services—increased by 74,000, the largest increase this year,” writes McCarthy, senior managing director, economic analysis and forecasting at C&W. Although most of the increase was in professional and business services, which added 62,000 jobs, “there was also a healthy increase in employment in financial services,” which gained 9,000.
In fact, McCarthy writes, “one of the more important developments for office markets across the US has been the revival of the financial services sector. In the past 12 months, financial services employment has increased by 151,000 jobs, the fastest growth for this sector since 2006. The financial sector was hard hit in the recession and has recovered slowly as businesses deal with a more stringent regulatory environment.”
Technology and creative sectors have represented another significant employment driver as far as CRE is concerned, McCarthy writes in the latest Weekly Economic Update from C&W. In April, employment in the so-called TAMI sectors—technology, advertising, media and information—was up 163,000 from a year ago.
Since the jobs recovery began in the US, “these TAMI sectors have added more than 590,000 jobs, compared with approximately 370,000 jobs in the financial services sector. Total employment in the TAMI sectors is about 5.7 million jobs, far less than the 8.9 million financial services jobs in the US.”
In the retail sector, by contrast, April’s monthly total of 12,000 new positions represented about half of the total recorded in the preceding month, writes Nadji, Walnut Creek-based senior EVP at MMI. “The retail sector still has not received a significant bump from the lower gas prices that have persisted throughout this year, although a recent increase in credit-card debt suggests that consumers may be loosening up.”
Notwithstanding the missing surge in consumption, Nadji notes that “the retail sector continues to log solid performance, with US vacancy forecast to tumble 60 basis points this year to 6.0%. Completions will total just 47 million square feet and will be inadequate to meet retailer needs, so an upswing in development may finally be forming.”
More generally, writes Nadji, “Steady employment gains are sparking the formation of new households and sustaining the vigorous performance of the US multifamily market. This year, national vacancy will edge up to 4.8% as 250,000 new units marginally outpace net absorption. Approximately half of the construction will be in 10 key metros, which could face short-term vacancy increases, but other markets will see little slowing.”
For industrial-related jobs, April’s data was “more of a mixed-bag,” writes Thorpe, chief economist with DTZ in Washington, DC. For one thing, energy-related employment continued to slip, with a decline of 15,000 in natural resources and mining jobs. “The energy sector has shed nearly 50,000 jobs since oil prices began plunging last summer.”
In manufacturing, there was “a weak gain” of 1,000 jobs in April, Thorpe writes. “On the upside, construction added a robust 45,000 new jobs, and the transportation and warehousing sector added a healthy 15,200 jobs. On net, April’s employment report was a positive one for most US industrial markets.” He sums up, “Although it was just one report, the April employment numbers reinforce our view that the economic backdrop as it pertains to commercial real estate remains solid.”