The Azucena Take: The Labor Market and Commercial Real Estate in 2022
If you have been following us for some time, then you know that the labor market and the commercial real estate market are connected. The demand and performance of one will also affect the other. This was true during the pandemic along with the recovery and it will hold true going into 2022.
As of February 2022; there are 10.9 million job openings but only 6.5 million people are looking for work (a difference of 4.4 million). Despite what some may think, enhanced unemployment and benefits are not responsible as all of them ended in 2021.
So what is the cause? There are a number of factors in play:
2.4 million people opted to retire and exit the labor market.
1.3 million people left the labor market to care for their families.
Net migration to the United States has plummeted (down by 77% compared to 2016).
Properties that are hit the hardest have been hotels and senior housing. Both of these businesses require a lot of staff but they have been struggling to find and keep workers. Retail services that have failed to be competitive have also taken a hit. Those who have failed to be competitive will need to start limiting services or plans of growth.
Office properties are a unique state. Businesses that use the office space are not having trouble finding people but they are struggling to bring people back into the office. If they require employees to return to the office, those employees could quit and go to another company (especially if they have a skill in demand and worked at a prestigious firm).
The limited return to the office will also impact the apartment markets. Apartments in an urban area will be impacted by the limited return to the office. Meanwhile, apartments in suburban areas will have no problem finding tenants.
Industrial properties will be the only ones the least impacted by the labor shortage. That is because they offer competitive wages and better job security.
The labor shortage is going to be a major issue for a few years and investors need to take it into consideration. However; it should not be the only factor to look at when growing their investments. There is always an opportunity for growth, one just needs to examine all angles.
The Azucena Take provides an inside look into the investment real estate market using the research done and data collected by Marcus & Millichap.