3 minute read time
September 4, 2020

Executive Summary

  • Nearly 1.4 million jobs were added in August, beating expectations of 1.3 million and building on strong monthly job gains since the recovery began in May.
  • The unemployment rate fell by 1.8 percentage points to 8.4%. The labor participation rate also improved during the month but remains depressed at 61.7%.
  • Government, retail and professional & business services sectors had the most job gains in August.
  • Despite this good news, CBRE expects that the upturn in real estate—particularly in the office, retail and hotel sectors—will lag the economic recovery.

Commercial Real Estate Highlights

  • Office: Employment in office-using sectors increased by 233,000 jobs in August. Financial activities increased by 36,000 and professional & business services by 197,000. In terms of real estate, office reoccupation remains limited, particularly in dense metropolitan areas, due to continuing caution by corporate America. The office market’s recovery will lag that of the economy until occupiers have a clearer picture of their space needs and when their offices can be safely reoccupied.
  • Industrial: Warehousing & storage jobs increased by more than 34,000 in August, while manufacturing gained 29,000. This continued growth bodes well for industrial demand, further underpinning a resilient performance during the pandemic. A complete recovery in industrial leasing volume is expected by Q3 2021.
  • Retail: Solid job gains occurred across retail sectors in August. Food services & drinking places gained almost 134,000 jobs. The broader retail sector gained nearly 249,000. While a recovery of retail is underway, retail property demand is expected to be muted over the short term. Leasing volume is not expected to fully recover until late 2024.
  • Construction: The construction industry gained 16,000 jobs in August and has been supported by ultra-low interest rates and expectations that the recovery will continue. Residential construction has been particularly strong.
  • Health Care: Health care added just over 75,000 jobs in August. Hospitals and ambulatory health services had the largest gains as non-COVID-related medical procedures, such as elective surgery, resumed. Nursing and residential care services continued to shed jobs with nearly 14,000 lost in August.
  • Multifamily: Continued job gains support household formation and rent collections. However, the end of enhanced unemployment benefits, along with state and federal government moves to prevent evictions, could cause some challenges for the sector over the short term. Additionally, low interest rates are supporting single-family housing sales and the high-density Class A multifamily market has weakened in part due to suburban flight. These are areas of short-term concern, but demographic changes that have benefitted the sector remain intact. We expect the multifamily sector’s recovery will be outpaced only by the industrial sector.
  • Hotels: The hotel sector remains hard-hit by the drop in business travel and lower levels of leisure travel. Accommodation services gained more than 15,000 jobs in August. A full recovery for hotels will take longer than all other asset classes, though hotels located in drive-to destinations are already recovering. Those that largely cater to business and international travelers will experience a much slower recovery. CBRE expects hotel demand will not fully recover until 2024.

The Bottom Line

Job growth in August confirms that the economic recovery remains on track. Yet 11.5 million fewer people are working than before the COVID-induced recession began. The risk that growth could fade is increasing because the government has not enacted new stimulus measures.

CBRE expects that the pace of real estate recovery will vary by property type. The industrial and multifamily sectors will perform the best over the near term. Recovery of the office sector will not begin in earnest until occupiers can confidently assess timelines for reopening offices, probably in Q1 2021.

A medical resolution is required to fully resolve the challenges to the economy and property markets. It is increasingly likely that portions of the population could begin receiving vaccinations in Q4 2020. We anticipate greater clarity on the continuing recovery at that time.


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