Executive Summary

  • The U.S. added 916,000 jobs in March versus expectations of 675,000. The leisure & hospitality sector had the biggest gain at 280,000.
  • The 10-year Treasury rate was up by approximately 4 basis points (bps) at midday to 1.72% amid investor fears of inflationary pressures. CBRE currently forecasts a 10-year Treasury rate of 1.9% by the end of 2021 and 2.1% by the end of 2022.
  • The unemployment rate fell to 6.0% and the labor participation rate increased by 10 bps 61.5%.
  • Job growth in March was broad-based, with notable gains in leisure & hospitality, government and construction. This will support improving fundamentals in all property types.
  • CBRE expects the U.S. economic recovery to accelerate in Q2 2021, although recovery of commercial property sectors—particularly office, retail and hotels—will lag.

Commercial Real Estate Highlights

  • Office: office-using jobs increased by 82,000 in March. Professional & business services added 66,000, while financial activities gained 16,000. Continued employment growth in these sectors will support office demand. CBRE does not expect a material recovery in leasing to begin until the second half of 2021, when widespread vaccinations allow offices to reopen safely.
  • Industrial: Job growth in the warehousing & storage sector was essentially flat in March, down by just 500 jobs. Manufacturing gained 53,000. Overall, the economic outlook and improving retail sector indicate continued growth and resilience for industrial & logistics markets.
  • Retail: Traditional retail gained 22,500 jobs and food services & drinking places gained 175,800. Increased vaccinations, a loosening of capacity restrictions and the broader economic outlook bode well for physical retail later this year.
  • Construction: The construction sector added 110,000 jobs in March, with solid growth in the residential and commercial sectors. CBRE does not expect rising interest rates to reach levels that will materially harm the sector.
  • Health Care: Health care gained 11,500 jobs in March. Ambulatory health care (outpatient services) gained 15,300, while hospitals lost only 600 and nursing & residential care lost 3,200. Overall demographic and technological trends will continue to support demand growth for health care and broader life sciences facilities.
  • Multifamily: The rapidly improving labor market will support household formation. Urban multifamily will particularly benefit as large cities reopen amid widespread vaccinations. In addition to cyclical factors, demographic trends and housing affordability will also continue to fuel demand.
  • Hotels: Accommodation services gained 40,100 jobs in March. CBRE expects an uneven recovery for the hotel industry that will extend to 2024, with pockets of strength in markets that cater to domestic leisure travelers. This outlook is brightening amid high vaccination levels and indications of pent-up demand.

The Bottom Line

The gain of 916,000 jobs in March was far higher than expectations of 675,000. Additionally, January and February job gains were revised upward by a combined 156,000. Strong gains were broad-based across sectors, with the highest increases in leisure & hospitality, government and construction. Inflation remains a concern for some investors but the 10-year Treasury yield was somewhat subdued in its reaction to today’s jobs report, rising to just above 1.7%. CBRE expects continued economic growth in Q2 2021 and a rapidly improving labor market. This will eventually aid the recovery of property markets, although certain sectors like office, retail and hotels will lag more than others.