March 9, 2016

With uncertainty permeating the financial markets and global economic outlook in early 2016, we have been monitoring key office market indicators for any impact of these factors on tenant demand. So what do the latest jobs numbers tell us? 

According to the Bureau of Labor Statistics’ preliminary numbers, the primary office-using sub-sectors1 added an average of 40,000 jobs in January and February 2016, a slowdown from the robust 73,000 monthly average in Q4 2015. However, this was similar to 2014 and 2015 when office-using employment growth got off to a sluggish start in the first quarter, before subsequently picking up later in the year. Seasonal factors, including atypical weather patterns, may have impacted the data during these periods. On an annual basis, office-using job growth was strong, exceeding 2% in February 2016 for the 19th-consecutive month. Annual office job growth has outpaced overall job growth in all but two months since September 2010,when both sectors resumed adding jobs on a year-over-year basis.

While it is premature to draw definitive conclusions from two months of data (and preliminary data at that),office-using job creation through early 2016 appears to have been stable, resilient and, thus far, consistent with the trend during the last few years. The early data support our view for 2016 that office-using job growth will fuel tenant demand which, in combination with still-low levels of construction activity, will result in the vacancy rate approaching pre-recession levels by year-end.

1Office-using employment is comprised of the information, finance and insurance, real estate, professional/technical services, management, office administrative, employment services, business support services, other support services and membership associations sub-sectors.