For some time, we've been saying that a full commercial real estate recovery in metro Boston won't happen until jobs return to their pre-recession levels, which may take another three years. Meanwhile, some of our colleagues in the industry suggest that the recovery is on a fast track and point to the state's falling unemployment rate as proof. Indeed, the headlines shout that our unemployment is down to 6.8%, compared to the national average of 8.5%. But that doesn't tell the whole story:
 

Underachievers

According to a recent study by Chmura Economics and Analytics, Massachusetts leads the nation in underemployment, specifically referring to workers who are employed only part time or who are inadequately employed in terms of underutilized skills.

Highlights of the report include:

• In 2011, the Commonwealth underemployment rate was 8.9%.
• 286,944 employees are working one or more educational levels below their capacity.
• 40% of workers over 50 years old are not working at peak capacity.
• 205,274 employers are working part time yet desire full-time employment.
• In this recession, the average duration for unemployment is 40.5 weeks (compared to 20 weeks in past recessions).
• The 8.5% unemployment figure does not include those whose salaries have dropped more than 30% from their peak. 

 Another study by the Center for Labor Market Studies Northeastern University paints an even bleaker picture: 

• If you factor in the number of unemployed people who have given up looking for work, about 15.9% of the labor market is not fully employed.
• The number of people who took part-time jobs because they were unable to find full-time work has grown nearly four-fold in Massachusetts since 2000 and has accelerated at an alarming pace this year. 

In short, even if the state's employment numbers keep improving, we still need to add thousands of new jobs. In the meantime, thousands of workers are frustrated, corporate confidence is low, and a mood of uncertainty prevails.

The Silver Lining

The good news for Bay State companies is that it will remain a tenant's market for at least the rest of this year, with the exception of the Back Bay and East Cambridge, where demand is high and inventory is tight. In this environment, tenants can still exercise their leverage in securing favorable terms, including free rent and generous tenant improvement allowances.

Our advice to tenants?

If you have a promising long-term plan, you should consider seven- to ten-year leases to take advantage of pricing at the bottom of this real estate cycle.

And if you're reluctant to add to your existing office space, consider hiring staff who can work off-site from virtual offices.

If you factor in the number of unemployed people who have given up

looking for work, about 15.9% of the labor market is not fully employed.

The good news is that it will remain a tenant's market....