energy and technology
With U.S. employment finally past the peak of the last economic cycle, some kinds of employers are taking on more office space. The thriving energy and tech sectors are leading the demand for office real estate, which is drawing in more foreign investors.
But commercial property’s resurgence, like payrolls, has been uneven.
Commercial real estate “is recovering in a way that is healthy but varies wildly by segment,” Auction.com Executive Vice President Rick Sharga said Friday at the National Association of Real Estate Editors conference in Houston. “Retail and office segments are kind of moving in slow motion,” while “multifamily and hospitality segments are fully recovered,” with industrial real estate in between.
“Tech and energy — we’re seeing no slowdown in both of these sectors,” said John Sikaitis, managing director of office and local markets research for real estate firm Jones Lang LaSalle, at the conference Thursday.
The San Francisco Bay Area, Texas and Sun Belt markets are seeing the strongest job growth, in some cases more than 4%, JLL notes.
Filling Up Desks
About 8.7 million jobs were lost in the recession and 8.8 million gained in the recovery.
JLL notes that while 1.7 million office jobs were lost, 2.8 million office jobs have been regained.
With some parts of the economy humming, the commercial property outlook is strong — a draw for international as well as domestic investors, according to several industry analysts.
“Right-to-work states are going to continue to do well, and wherever there are big economic growth drivers, that’s where we’re doubling down,” said Chip Clarke, president of the Americas at commercial real estate firm Transwestern.
Clarke said Thursday that he’s “very bullish” on U.S. commercial real estate.
Trey Odom, CEO of development firm Avera Cos., cited “strong fundamentals and a low vacancy rate — that kind of speaks to the industrial world.”
“Keep your eye on mixed-use” real estate “and this fight for talent” in especially thriving parts of the work world, said Cassie Stinson, a real estate attorney at BoyarMiller in Houston.
U.S. office vacancy logged a 15.2% rate in the first quarter — flat vs. Q4, but that was as 10.5 million square feet of new office space was delivered, according to a Cassidy Turley report.
New office construction is picking up, says the commercial real estate firm, with 65.4 million square feet of space under construction at the end of Q1, up 31% vs. a year earlier.