With Labor Figures, Time to Talk of CRE Revival?
Last Updated: June 6, 2010 09:49pm ET
WASHINGTON, DC-Labor Department figures released Friday disappointed many–in all sectors of the economy–with the lackluster growth in private sector hiring. In May, 431,000 jobs were added–the vast majority of which, though, were temporary Census workers. The private-sector only added 41,000 jobs to the economy.
For the real estate industry–a lagging indicator–these numbers are not going to have an immediate impact. Indeed, the fundamentals in the real estate space are not likely to improve at least until the end of the year, according to several industry analysis reports.
Still, though, the latest figures provide an opportunity to take a snapshot of where commercial real estate markets stand right now, compared to a year ago. From that perspective, the situation is slightly less grim. At bottom it shows that progress is being made. “Anecdotally, it is getting better for landlords,” Hirschfeld Properties CEO Elie Hirschfeld tells GlobeSt.com, speaking of the New York City market. “We see that in both office and residential properties. We as landlords needed to really stretch to bring in tenants. One critical sign that the real estate market is improving is the fact that the tenant is back to paying the brokerage fee for residential” as opposed to the landlord, which had been the case for the last year or so.
For office in New York, John B. Brod of PBS Real Estate, is predicting that office rents will rise by the end of 2011. “We see a demand coming between end of 2011 and 2014, as the economy improves.” W. Joshua Levering, SVP of Parsippany, NJ-based NAI James E. Hanson, reports he is seeing an increase in activity, with firms beginning to look for additional space in both the office an industrial segments as well as some retail. Kenneth Katz, co-founder and principal of Houston-based Baker Katz reports that the most substantial and noticeable improvement he is seeing is that, as a whole, retailers are more focused on expanding than they have been at any time since the recession started. “Rental and occupancy rates for first-class retail projects in Houston were minimally affected during the recession,” he says. “Since the development pipeline is virtually empty, we believe that those rates have a limited downside.”
None of this, however, is meant to sugar coat the long-slog ahead. Levering’s colleague Andrew Somple, in the Hackensack, NJ office, put it this way: “There is a lot of pessimism in the marketplace which is stalling any organic growth of users.” Nor does Levering discount the import of employment trends to real estate fundamentals. “Discussions with my customers and clients about hiring typically hinge on what happens in our economy coupled with the overall costs of hiring full time employees,” he tells GlobeSt.com. “It is often easier to hire temporary employees and wait and see how the economy improves.”