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Robert Bach
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Private sector employers in June added 262,000 jobs and government agencies added 26,000 positions, resulting in a net gain of 288,000 new jobs that will potentially have a substantial impact on commercial real estate, according to a Marcus & Millichap report. During June, the national unemployment rate fell to 6.1 percent from 6.3 percent in May, reaching its lowest level since September 2008.
Brighter employment prospects for the youngest workers will potentially lead to the creation of new households, unleashing new demand for rental housing, according to Marcus & Millichap.
The national apartment vacancy was flat in the first quarter, but elevated apartment completions in select markets will underpin a 20 basis-point rise in vacancy this year to 5.2 percent, forecasts Marcus & Millichap. The possibility that newly formed households can generate demand greater than currently projected, however, may further minimize the forecast increase in nationwide vacancy during 2014, the report emphasizes.
Marcus & Millichap predicts that job growth in degreed professional and business service fields, as well as financial services, will fill vacant office space and generate demand in the remaining quarters of this year.
An increase in tenant demand will result in a 120 basis-point drop in U.S. vacancy to 14.8 percent this year, predicts Marcus & Millichap.
Robert Bach, director of research for the Americas with Newmark Grubb Knight Frank, describes the job growth in June as "robust." He also believes the job increases in the sectors most important to commercial real estate will boost landlords' net operating income as space is filled and rents move higher. This will, in turn, he says, support investment activity.
During the second quarter of 2014, an average of 272,000 total positions were added monthly, surpassing the average monthly gain of 190,000 new jobs in the first quarter. The office-using sectors, comprising information, financial activities and professional and business services, added a combined 93,000 jobs in June, well above the previous six-month average of 51,900.
Hiring at retail stores led to an increase of 72,000 trade, transportation and utilities positions. Due to recent positive reports on factory orders and manufacturing, the nation's plants added 16,000 posts in June, while construction payrolls grew by 6,000 positions.
What's more, revised figures provided by the Bureau of Labor Statistics for April and May show that employers added 29,000 more nonfarm payroll jobs than previously reported.
According to Bach, some analysts suggest that the improving labor market could prompt the Federal Reserve to raise interest rates sooner than it had intended in order to head off inflation. However, Bach says inflation is unlikely to become problematic with wage growth mired around 2 percent, which remains low by historic standards.
Bach, who has previously called the labor market "remarkably consistent in its unremarkable performance," says the decline in unemployment from 6.3 percent in May occurred for the right reasons. He cites the fact that the number of survey respondents who said they worked during the reference week rose substantially, the number of unemployed fell substantially and the labor force expanded modestly. This had the effect of prompting discouraged persons to resume previously abandoned job searches.
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