Robust employment helps support the commercial real estate market
See how the labor market’s strength is stoking demand for office space – and what this means for commercial real estate prices.
August 30, 2019 | 1 minute read
The U.S. labor market remains an area of notable strength this year despite investors’ increasing concerns about slowing global economic growth. In each of the past two weeks, strong retail sales and retail earnings data have helped to demonstrate the labor market’s vigor.
Against this backdrop, momentum in the office segment of the commercial real estate market has been a natural corollary to the labor market’s strength. In Q2, overall office vacancy rates moved to an 18-year low while demand for office space reached its highest point since 2007.1
Activity in suburban and metro areas has primarily driven demand in the past 12 months, as office vacancies in both categories have fallen to their lowest point in more than a decade.2 Demand in central business districts has held firm in recent years, with national vacancies hovering near 10.5% since 2015.2
The macro environment supporting the office market helps to highlight the healthy backdrop that continues to underpin the broader CRE market. Earlier this year, CRE prices saw their largest monthly rise in more than 4 years.3 Today’s low rate environment could continue to stoke demand across the market in the coming months.