February 3, 2012 – 10:48 pm
February 3, 2012
- January employment gains significantly outpaced expectations, providing further evidence that the economy is on the mend. Hiring was broad-based, reinforcing the perception that the recovery is not reliant on a single sector, but the gains have yet to reach the levels necessary to significantly reduce the massive work force displacement created during the recession. As demonstrated last year, when first-quarter hiring got off to a good start, significant risks remain. Election year politics, the eurozone financial crisis and Middle East instability each have the potential to derail the positive hiring trend just as the debt ceiling debate and ensuing U.S. credit downgrade did last August. Still, the U.S. private sector has added jobs for 23 consecutive months, offering the promise of continued recovery momentum.
- Private employers added 257,000 workers in January with eight of 10 sectors reporting gains. Professional and business services, one of the primary office-using segments, led the way with the addition of 70,000 positions. Manufacturing was also a bright spot, adding 50,000 employees last month, with most of the gains tied to durable goods production. Leading manufacturing indices have steadily gained ground for the last three months, giving rise to hopes that this key sector finally has sufficient momentum to drive broader economic improvement. Government employment, however, continued to offset private job gains with a loss of 14,000 positions. Considering the severe governmental cutbacks of the last two years, it appears that the government is finally approaching its new equilibrium staffing levels.
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The unemployment rate fell 20 basis points to 8.3 percent in January, the lowest level in three years. However, some underlying trends paint a more complete picture of the amount of slack that persists in the labor market. The under-employment rate, which includes individuals actively seeking work and part-time workers searching for full-time positions, declined only 10 basis points to 15.1 percent in January. The rate has remained above 10 percent since mid-2008. Also, 1.1 million discouraged workers were counted last month, a gain of 114,000 from December.
Impact on Commercial Real Estate
- Expanding professional and business service payrolls offset the loss of 18,000 financial activities and information sector positions, yielding a net gain of 32,000 full-time office-using jobs. More than 184,000 full-time office using jobs were added over the past six months, contributing to a 10-basis-point drop in national office vacancy to 17.3 percent in the fourth quarter. As office-using employers transition from backfilling empty cubicles to expanding space requirements during 2012, the vacancy rate will fall an additional 70 basis points to end the year at 16.6 percent.
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Job growth remains a significant driver in the creation of new rental households. The 1.8 million jobs created last year, together with other forces, sparked the absorption of more than 170,000 apartment units in 2011. As a result, vacancy fell 140-basis-points to 5.2 percent. This trend should continue this year, albeit at a slower pace, with vacancy forecast to decline an additional 40 basis points to 4.8 percent by year end. This prolonged strong demand, together with a limited development pipeline, will empower owners to generate 5.7 percent effective rent growth this year.
The Research Brief blog from Marcus & Millichap offers timely insight and expertise into the rapidly changing investment real estate industry. The Research Brief is published weekly by top industry professionals, showcasing time-sensitive information and valuable analysis. Add the Research Brief blog to your reading list today.
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.
January 7, 2012 – 12:18 am
January 6, 2012
- December capped a solid year of job growth as the economy generated positive hiring every month in the year for the first time since 2005. The private sector led the way, marking its most substantial growth in six years. This trend should continue, with the labor market generating gradual momentum during 2012 as employers continue to re-staff to meet rising demand for goods and services. Lingering downside risks, however, will repress hiring from achieving breakaway growth. Political posturing in Washington will fuel uncertainty through the year while eurozone troubles will restrain the U.S. economic outlook in 2012.
- The unemployment rate fell 20 basis points in December to 8.5 percent, the lowest level since early 2009, as all of the 10 private-employment sectors added workers for the month. In December, 212,000 private-sector positions were created, offsetting a loss of 12,000 government posts and yielding a net gain of 200,000 total jobs. A seasonal surge in retailer and package delivery hiring supported the creation of 90,000 trade, transportation and utilities jobs, while education and health services continued its year-long expansion, adding 29,000 workers. The holidays also contributed to the hiring of 21,000 leisure and hospitality employees, with nearly all of the gains recorded in bar and restaurant employment.
- Despite the supply-chain ripples of the natural disaster in Japan, political gridlock at home and the U.S. debt downgrade in August, the labor market staged a respectable broad-based recovery for the year. The private sector led the way, hiring more than 1.9 million employees, with only the information sector completing the year in negative territory. Factoring in a loss of government positions, more than 1.6 million jobs were created in 2011. Professional and business services employers led the gains, adding 452,000 jobs, while retail-related hiring sustained additions of nearly 400,000 workers. The financial services sector generated its first annual gain since 2006, adding 7,000 jobs in 2011.
Impact on Commercial Real Estate
- Fueled by the gains in the financial services and professional and business services sectors, full-time office-using employment rose by nearly 327,000 workers in 2011. The increase in jobs enabled companies to backfill empty cubicles and generated a modest increase in new office space requirements. Nationwide, net absorption of more than 25 million square feet pushed office vacancy lower by 40 basis points to 17.2 percent last year. Continued demand momentum in 2012 and restraint in development will amplify this positive trend, generating an additional 70-basis-point decline in vacancy in the coming year.
- Job growth in 2011 supported an increase in retail spending, resulting in more trips to shopping centers across the country. The rise in traffic fueled a tempered pace of new store openings and drastically reduced the rate of closures, generating a 30-basis-point decline in national retail vacancy to 9.7 percent. In the year ahead, single-tenant space will account for a sizable portion of completions, while retailers expand cautiously, leading to a decline in vacancy of 50 basis points to 9.2 percent.
- Apartments continue to benefit from the creation of new rental households that accompanies a job market revival. The national vacancy rate fell 120 basis points in 2011 to 5.4 percent, while effective rents remained on pace to grow 4 percent. Continuing preference of rental housing over homeownership by many, and solid hiring in the renter-heavy 20- to 34-year-old age cohort will support an additional 40-basis-point decline in vacancy during 2012 and spark a 4.8 percent jump in effective rents.
The Research Brief blog from Marcus & Millichap offers timely insight and expertise into the rapidly changing investment real estate industry. The Research Brief is published weekly by top industry professionals, showcasing time-sensitive information and valuable analysis. Add the Research Brief blog to your reading list today.
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.
December 6, 2011 – 12:09 am
December 5, 2011
The Research Brief blog from Marcus & Millichap offers timely insight and expertise into the rapidly changing investment real estate industry. The Research Brief is published weekly by top industry professionals, showcasing time-sensitive information and valuable analysis. Add the Research Brief blog to your reading list today.
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.
November 16, 2011 – 1:40 am
November 15, 2011
The Research Brief blog from Marcus & Millichap offers timely insight and expertise into the rapidly changing investment real estate industry. The Research Brief is published weekly by top industry professionals, showcasing time-sensitive information and valuable analysis. Add the Research Brief blog to your reading list today.
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.
