Job Losses Point To Soft Lease Market, Expert Says
The worsening recession is having an increasingly negative effect on the commercial real estate industry, according to a new report, making recovering for the sector unlikely until as long as 2010.
The worsening recession is having an increasingly negative effect on the commercial real estate industry, according to a new report, making recovering for the sector unlikely until as long as 2010.
According to the report from Bob Bach, Senior Vice President, Chief Economist for Grubb & Ellis, the problem stems from the loss of 533,000 net payroll jobs in November, the highest monthly loss since December 1974. Losses occurred in all sectors except for education and health services, government and natural resources and mining.
Accelerating job losses in November mean 1.9 million jobs have been lost so far this year, according to Bach, who says that this recession has already lasted longer than recessions in 1990-1991 and 2001, and appears to be growing in intensity.
For commercial real estate, the broader recession will act as a drag, Bach says, because job growth is the most important leading indicator of office space absorption, and it supports leasing activity for apartments, shopping centers and, to a lesser extent, industrial properties.
According to Bach, the recent acceleration in job losses capped by the massive loss in November indicates that leasing market fundamentals are poised to soften further. He predicts that job losses will continue through most of 2009, meaning that tenant demand for commercial real estate, which lags the labor market, may not firm up until 2010.
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