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Soaring Job Losses Heighten Concerns for Commercial Real Estate

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  • Soaring Job Losses Heighten Concerns for Commercial Real Estate

    While Wall Street shrugged off Friday’s dismal employment report — the Dow Jones Industrial Average rose nearly 40 points — the loss of 663,000 jobs in March portends more weakness for U.S. commercial real estate.

    “It means that we’ll see several more quarters of negative absorption, rising vacancy rates and softening rental rates,” predicts Bob Bach, chief economist for Grubb & Ellis, headquartered in Santa Ana, Calif. “This will translate into further pressure on net operating income at the property level with upward pressure on delinquency, default and foreclosure rates. I do take solace from the fact that it was within the range of expectations.”

    The national unemployment rate rose from 8.1% in February to 8.5% in March and now stands at a 26-year high, according to the U.S. Labor Department. Adding insult to injury, January job losses were revised from 655,000 non-farm payrolls to 741,000. Since the recession officially began in December 2007, the economy has lost 5.1 million jobs.

    “The ripple effect continues,” explains Hessam Nadji, managing director of research services for Marcus & Millichap Real Estate Investment Services based in Encino, Calif. “I truly believe that what happened in September and October 2008 when interbank lending and the commercial paper market shut down was a trigger that took us from a serious recession and a credit crunch to really an extreme downturn, especially when it comes to jobs.”


    Also watch "Florida commercial real estate collapse March 2009" - watch here..


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