Job growth drives demand for us commercial real estate

Photo: Michael Tapp

Job growth in the US is driving demand for commercial real estate, as the market finds an increasingly firm footing ahead of 2015.

Despite a slowing global economy, forward economic momentum in the U.S. should keep commercial real estate activity on firmer footing, according to the National Association of Realtors' quarterly commercial real estate forecast.

National office vacancy rates are forecast to decrease 0.5 percent over the coming year. Improved manufacturing activity should lead to a declining vacancy rate for industrial space (0.4 per cent), while retail space is forecast to decline 0.2 per cent behind a boost in consumer spending from personal income gains and lower gas prices.

"Job growth is the catalyst to improved demand for commercial real estate leasing and new construction projects," explains Lawrence Yun, NAR chief economist.

"Solid economic growth in the third quarter proved that the second quarter wasn’t an anomaly, as business spending increased, commercial construction rose and the labor market continued to make positive strides.

However, Yun does caution that softening in the global economy will likely widen the trade deficit in the US and could trigger some weakening in the overall economy.

"GDP growth in the fourth quarter will be sluggish at around 2 per cent behind stalling exports. Although GDP will likely climb to near 3 per cent in 2015, the current pace of job growth could slow and ultimately impact commercial real estate activity if sluggishness in the global economy persists."