Will the Labor Market Affect Your Rent?

Depending on where you are located, you may see rent increases as the labor markets begin to tighten. Our latest Cassidy Turley Employment Tracker 2011 presents the following data:

• The Top 5 Job Producing Metros (Dallas, Houston, New York, Chicago and DC Metro)
• An Employment Picture graphically showing the year to year % change in employment across the U.S.
• Regional Job Market Summaries across the country (Northeast, Midwest, South and West)

According to the report, private sector payrolls advanced to its biggest gain in five years in April of this year and have been adding jobs consistently for 16 straight months. As a result, commercial real estate office vacancy, which lags behind by two to three quarters, has been falling. Markets are tightening and rents are stabilizing. While landlords are still eager to sign leases with creditworthy companies, they have stopped acquiescing to outlandish requests like external exits, special restroom installations or VIP parking right in front of buildings.

Although the U.S. economy has recently hit a soft patch relative to the growth observed in 2010, the bulk of economic data largely suggests the rate of growth will pick up from here. Still-high oil prices, the unknowable impact of the Japan disaster and the European Sovereign debt crisis provide the most significant threats to the overall economy. The most encouraging signs of “strength below the surface” include still-hefty corporate profits, still-improving equity markets and better flowing credit. Moreover, it is evident from the latest employment trends that if events overseas stabilize, businesses are poised to hire in larger numbers, and improvement in property markets will follow suit. These improvements are tentative, but encouraging for the economy in general.

Specifically, each company must evaluate its position in light of the positive economic changes that are beginning to occur. If you are among those who see growth in your future, it is wise to consider your overall real estate strategy. These are three areas for consideration.

1. Start with a comprehensive survey of all of your real estate holdings and leases. If you have more than 10 leases or properties you may want to consider Lease Administration Software to help you track important dates and clauses.
2. Evaluate your current operations relative to the space being used presently and with projections for the near and longer term.
3. Each market has its own unique set of standards in commercial real estate. Do you know if you are getting the full advantage in your market?