Executive Summary

  • The U.S. lost 140,000 jobs in December vs. an expected gain of 50,000.
  • The unemployment rate was unchanged at 6.7% and the labor participation rate remained at 61.5%
  • Job losses were concentrated in the food services & drinking places and state and local government sectors.
  • The government’s COVID-related economic stimulus in late December, along with continuing distribution of COVID vaccines, sets a firm foundation for a resumption of the labor market recovery in 2021. Full Democratic control of the presidency and Congress significantly increases the likelihood of additional near-term fiscal stimulus.
  • CBRE expects economic growth will accelerate in 2021, but with some residual near-term weakness. Property sectors, particularly office, retail and hotels, will lag the broader economic recovery.

Commercial Real Estate Highlights

  • Office: Employment in office-using sectors increased by 173,000 jobs in December. Professional & business services added 161,000 and financial activities gained 12,000. Still, CBRE does not expect a material recovery in the office market to begin until vaccines are widely administered and restore confidence in reoccupying office space.
  • Industrial: The warehousing & storage sector added 8,200 jobs in December, while manufacturing gained 38,000. Growth in these sectors affirms the industrial property market’s resilience. We expect this job growth will continue, along with robust demand for industrial & logistics properties.
  • Retail: While traditional retail gained 120,500 jobs, food services & drinking places lost 372,000 due to increased restrictions on operations from rising COVID infections and diminished consumer confidence.
  • Construction: Supported by ultra-low interest rates, the construction sector gained 51,000 jobs in December. Construction job growth was concentrated in the specialty trade, heavy & civil engineering and residential sectors. Nonresidential building construction lost 4,300 jobs. New commercial construction is largely concentrated in the industrial and multifamily, as well as office buildings with substantial preleasing commitments.
  • Health Care: Health care added 38,800 jobs in December. Ambulatory health care services, which include doctors’ offices, outpatient care, laboratories and home health, gained 20,700 jobs. Hospitals gained 31,500, while nursing & residential care facilities lost 13,400. Life sciences remains a strong sector for job growth and commercial real estate demand.
  • Multifamily: Stalled job growth is problematic for near-term multifamily fundamentals. Nevertheless, a significant amount of fiscal aid to the economy should benefit the sector. In addition to direct payments to individuals and families and enhanced unemployment benefits, $25 billion for rental assistance was also included in the latest COVID-relief legislation. However, some property owners may experience difficulties due to the extension of a federal moratorium on evictions until the end of January. The potential for additional fiscal aid and rapid vaccine distribution should ensure that any short-term issues do not weigh on multifamily fundamentals for an extended period.
  • Hotels: The hotel sector remains hard-hit by the pandemic. Accommodation services lost 23,600 jobs in December. CBRE expects that overall hotel demand will not fully recover until 2024, though certain subsectors, such as “drive-to” locations, will recover faster.

The Bottom Line

The December jobs report was below expectations, but not entirely surprising. The combination of delayed fiscal aid and a spike in COVID infections led to tighter restrictions on businesses and altered consumer behavior. Job losses were particularly concentrated in the food & beverage and state and local government sectors.

With the additional $900 billion in economic stimulus last month, and with broader vaccine distribution, the economic outlook will brighten as 2021 progresses. Full democratic control of the executive and legislative branches also increases the likelihood of more fiscal stimulus. The 10-year Treasury yield’s recent move above 1% portends a rise in inflation.

CBRE expects some economic weakness in the first part of the year before stronger growth takes hold in the second half. December’s jobs report likely bolsters support for increased aid to state and local governments, as well as to consumers.

CBRE expects that a strong economic rebound will bring about material improvement in commercial real estate markets in 2021. Given the prospect of additional stimulus, there is notable upside potential to our forecast of 4.9% GDP growth. However, certain property sectors, particularly office, retail and hotels, will lag the broader economic recovery.