BK Perspective Real Estate USA 2016

Perspective on Real Estate 2016 - U.S.
“Professional and business
services employment is now
almost 11.0% greater than it was
prior to the recession.”
Growth trends in education and healthcare certainly
correlate to the rise in foreign students in the U.S.,
but the impact of foreign students, including those
in the OPT program, is undoubtedly felt in a variety
of sectors. In particular a range of subsectors within
professional and business services have leveraged both
OPT labor and the H-1B visa program to perpetuate
their very healthy growth. We provide more detail on
trends in these subcomponents in the office market
section of this report, but at a high level it is clear that
professional and business services is still a significant
source of growth in the overall economy. Although
the pace of growth in this sector has eased somewhat
from a year ago, it is still quite strong at 3.1% yearover-year
as of November 2015. Professional and
business services employment is now almost 11.0%
greater than it was prior to the recession.
The greatest array of technology-related jobs
fall under professional and business services and
metropolitan areas that have emerged the strongest
from the Great Recession are generally those with
significant exposure to these fields. Austin, the Bay
Area, Denver and Raleigh, among others, have all
outstripped the national expansion at least in part
due to their success in technology-related fields.
It also remains to be seen how well the Bureau of
Labor Statistics is actually tracking many of the jobs
created during this expansion. This is particularly
true as technology helps fuel a significant rise in
independent workers and what has become known
as the “gig-economy” where workers are able to
perform tasks when they want for as much time as
they want, often connected to customers through
some type of technology-based intermediary (e.g.,
Uber drivers and the Uber mobile application).
Capturing all of these workers, assigning them to
appropriate employment sectors, and correctly
classifying them as fulltime or part-time is
undoubtedly a data collection challenge that will
potentially lead to greater revisions to employment
data in the years ahead.
Goods-producing sectors, which include
natural resources and mining, construction and
manufacturing are actually a mixed-bag in the U.S.
Natural resources and mining is contracting severely
along with energy prices, but the sector grew so
quickly in recent years that this contraction still leaves
employment nearly 6.0% higher than it was prior to
the recession (see Fig. 2.6).
“Homebuilders have recently
noted their concerns about the
scarcity of available labor.”
Despite losing a bit of momentum versus 2014,
construction was the fastest growing major sector
in the country during the year ending in November
2015, at 4.2%. Rising levels of residential and
commercial construction, along with major public
infrastructure projects, are helping to spur this growth.
Construction employment remains further below
peak than any other employment sector, however,
and the downturn in this sector was severe enough to
drive away some prospective workers. Homebuilders
and general contractors have recently noted their
concerns about the scarcity of available labor.
Given trends in the ISM manufacturing index, it
should come as no surprise that manufacturing
is a weak spot in the employment picture. After
posting respectable gains in 2014, the sector barely
grew year-over-year as of November 2015. The
secular decline of manufacturing employment in
the U.S. shows no signs of reversing, with current
manufacturing employment more than 10.0% lower
than it was prior to the recession. The strong dollar
and weak performance of major U.S. trading partners
will continue to hinder growth in 2016.
It is evident that, while a few sectors are struggling,
the U.S. is seeing broad-based employment gains.
Even sectors such as government, which was hurt
18 | Bentall Kennedy (U.S.) Limited Partnership