4 minute read time
February 5, 2021

Executive Summary

  • The U.S. gained 49,000 jobs in January, nearly matching consensus expectations. Job hiring was modest, as anticipated, but nevertheless bounced back from December’s steep losses.
  • The unemployment rate fell to 6.3% and the labor participation rate decreased 10 basis points to 61.4%.
  • Job losses were concentrated in the leisure and hospitality sectors, down by 61,000.
  • January’s jobs report does not fully reflect the impact of the COVID relief package enacted in late December.
  • Lawmakers are weighing additional spending proposals to support people adversely affected by the pandemic.
  • CBRE expects economic growth will accelerate in 2021, but with some residual weakness in the first quarter. Recovery of commercial property sectors—particularly office, retail and hotels—will lag that of the broader economy.

Commercial Real Estate Highlights

  • Office: Employment in office-using sectors increased by 105,000 jobs in January. Professional & business services added 97,000 and financial activities gained 8,000. Continued employment growth in these sectors bodes well for office demand. However, CBRE does not expect a material recovery in leasing until the second half of 2021, when vaccines are widely available and workers can safely reoccupy offices.
  • Industrial: The warehousing & storage sector lost 17,400 jobs in January, while manufacturing lost 10,000. Despite the downturn, additional fiscal aid and robust spending on equipment provide a foundation for future job growth. CBRE expects the industrial & logistics market to remain strong.
  • Retail: Traditional retail lost 37,800 jobs and food services & drinking places lost 19,400. This weakness was likely influenced by seasonal adjustments following the holidays. As the pandemic is controlled through widespread vaccinations and the economic recovery picks up steam, the stage will be set for a broader retail recovery, particularly in H2 2021.
  • Construction: Employment in construction decreased by 3,000 jobs in January. Weakness in this sector was concentrated in specialty trade contractors. Residential construction remains strong, fueled by demographic trends and low interest rates, so construction employment will pick up soon.
  • Health Care: Health care lost 29,600 jobs in January, mainly due to the loss of 31,000 in nursing & residential care facilities. Employment losses in hospitals (2,100) were less pronounced, while ambulatory health services gained 3,500. Nevertheless, the dynamics that make life sciences a strong sector for commercial real estate demand remain intact.
  • Multifamily: Weakness in the labor market is a headwind for multifamily fundamentals over the near term. The federal government has extended the eviction moratorium, which is good news for hard-pressed renters but creates some challenges for property owners. Economic recovery will support an improvement in multifamily fundamentals later in the year and the potential for additional fiscal aid provides some upside to near-term expectations.
  • Hotels: Reduced travel volumes due to the pandemic continue to weigh on the hotel industry. Accommodation services lost 18,300 jobs in January. CBRE expects a slow recovery for the hotel industry that will extend to 2024, with pockets of strength in markets that cater to domestic leisure travelers.

The Bottom Line

The January jobs report does not fully reflect the impact of the $900 billion COVID relief package enacted in late 2020. This should start to show up in February and March. CBRE expects economic weakness to persist in Q1 2021 before the recovery gains traction later in the year. We expect stronger growth once the full impact of fiscal stimulus takes hold and vaccines are more widely distributed. Over the near-term, CBRE is forecasting U.S. economic growth of 4.9% in 2021 and 4.2% in 2022. The potential for additional government aid provides upside to CBRE’s current forecast. Conversely, the emergence of virus variants that may be resistant to current vaccines present downside risk.

Although the U.S. economy employs 9.9 million fewer people than it did before the pandemic, the continued economic recovery will improve the labor market and, in turn, the real estate market. The industrial and multifamily sectors remain relatively strong and will be the first to fully recover. Recovery of the office, retail and hotel sectors will take several years. With the potential for additional fiscal stimulus, expectations could be revised upward in the near term.


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