March 4, 2011
- February employment growth offers the clearest indication yet that the recovery has taken hold and the accumulation of positive trends in retail spending and manufacturing will translate into significant positive momentum. Private-sector employers generated jobs for the 12th consecutive month in February and posted the fourth largest monthly increase in five years. After raising the productivity of existing work forces to peak levels, employers will increasing hiring to meet growing demand and restore bench strength depleted by the recession. Hiring by small and mid-size businesses, especially, will prove crucial to sustaining economic growth in the coming year. Many economic headwinds have eased in recent months, but weak state and local government budgets will remain a challenge. In addition, surging oil prices will weigh on already fragile corporate confidence, potentially stalling future hiring.
- Private-sector employers added 222,000 jobs in February, as nine out of 10 sectors expanded, with information services employment unchanged. State and local governments partially offset these gains, generating net job growth of 192,000 positions for the month. The additions were accompanied by an upward revision for the previous two months of 89,000 jobs. Signs of a manufacturing-led recovery continued to emerge during February, as employers in this sector created 33,000 jobs, the fourth consecutive monthly increase. The additions confirm the results of recent manufacturing sector surveys and other positive trends. Following weather-related layoffs in January, construction employers generated jobs for only the fourth time in the past three years, adding 33,000 positions and possibly signaling the end of a four-year drop in construction employment.
- Office-using employment conditions improved in the past five months, providing a foundation for a gradual recovery in property operations. The addition of 133,000 full-time office-using workers during this period, including 34,500 jobs in February, will help backfill underutilized space in many office properties, a necessary first step before tenants consider expanding. The expected creation of 730,000 office jobs nationwide this year will result in a moderate rate of tenant expansion, supporting a 60 basis point drop in vacancy to 17 percent. Rents will start to recover modestly in the second half, leading to a 1.1 percent year-over-year gain in asking rents and a 1.8 percent rise in effective rents.
- Promising February employment figures and sustained job creation through 2011 will bolster consumer spending levels as re-employed households move forward with purchases. Major markets with a strong tourism industry, including New York City, San Francisco and Miami, stand to benefit from renewed business and consumer confidence as both leisure and company travel strengthens. As a result, responsive national retailers will increasingly look to growth opportunities at high-traffic shopping centers, further propelling major retail markets across the country into recovery mode. During 2011, the national retail vacancy rate is anticipated to fall 20 basis points to 9.8 percent, matching last year’s improvement.
- Gains in manufacturing and trade, transportation and utilities employment will continue to support stronger performance in warehouse and distribution properties. National industrial property vacancy declined 20 basis points to 12.6 percent in the second half of 2010 on positive net absorption of nearly 28 million square feet. During the period, 176,000 jobs were added in the manufacturing and trade, transportation and utilities sectors, as the movement of goods from ports and factories increased. Industrial property vacancy will fall another 30 basis points this year to 12.3 percent as strengthening demand for goods supports additional manufacturing, transportation and warehousing job growth.
Impact on Commercial Real Estate
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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.