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Employment Seen to Buoy CRE Performance in 2014

Angie Shipe December 10, 2013 0

Jobs will play an important role in strengthening commercial real estate (CRE) growth and recovery next year, an Auction.com senior executive said in an interview with GlobeSt.com.

work officeAccording to Peter Muoio, Ph.D., employment will be a key driver in the absorption of commercial space, as exemplified by the office sector, whose expansion and increased demand in manpower translated to more commercial space lease and purchases among companies.

We’ve examined how much shadow inventory was left from the recession, and how increased office employment had helped lessen that inventory,” Muoio told GlobeSt.com. “Going forward, strong employment means stronger absorption of space.

Consumer spending is also seen to play a role in boosting CRE growth, albeit at a much slower pace than employment. Muoio said that while employment is definitely associated with retail spending, the increased spending activity will not contribute any significant space absorption in the retail sector. However, Muoio does not discount the fact that increased wages and boosted consumer confidence would strengthen the foundation in retail space absorption.

The current pace will support CRE recovery, and we should see a higher level of demand for each job-created space because we have burned off most of the shadow vacant inventory,” Muoio said.

Muoio also noted that the apartment sector is one of the property segments that will perform really well next year, as a paradigm shift from single family to multifamily takes place. New household formation and employment growth are also forecasted to be the next economic drivers in coming years.

In related news, Sierra Commercial Real Estate, a Colorado Springs-based brokerage also had the same findings as Auction.com, but with focus on Colorado Springs’s CRE. According to the brokerage’s forecast, more jobs will maintain the state’s CRE’s rebound in 2014, as companies make major office purchases, lowering vacancy rates to below 15 percent from 16.8 in 2012.

Sierra president Dave Delich noted that jobs will bring “internal growth and external relocation into the market,” which will help CRE space absorption through 2014.

Resources:

http://www.globest.com/news/12_748/orangecounty/employment/CRE-Needs-Strong-Job-Growth-in-2014-340409.html?ET=globest:e41316:800601a:&st=email&s=&cmp=gst:Executive_Watch_20131210:editorial

http://gazette.com/colorado-springs-commercial-real-estate-market-needs-more-jobs-to-continue-its-recovery/article/1510822#VD1mVxyFvUWpRG4f.99

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