Layoffs bring space woes.
The national unemployment rate reached 6% last month, its highest level 1994. Despite reports that the economy is rebounding, the news still suggests an unsettled economy.The effects of high unemployment on commercial office leasing are varied, with firms balking on expansion plans and moving cautiously on the hiring front.
"The biggest impact on leasing is corporate layoffs. The numbers we look at are any rises in employment," said John Powers, vice chairman of Insignia/ESG.
The good news, according to Powers, is that an economic recovery typically involves rising unemployment.
Unlike the boom years that ended the 20th century, firms are not stocking up on extra space as a way to absorb future staff growth. It was assumed then that a growing economy would spur extra staffing, and that strategy held its ground for a string of years.
The construction industry lost 19,000 jobs in April. Economists predict that the economy will continue to grow at 3 to 3.5% next quarter.
"If the perception is that the economy is in bad shape, few banks will lend money to build office space," said Lawrence Fiedler, professor of real estate at New York University's Real Estate Institute.
Fiedler added that the unemployment rate is a pretty deceptive statistic, however.
"Even if the economy is rebounding, you have to remember that real estate is a trailing indicator," he said.
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| Title Annotation: | the effects of high unemployment on commercial office leasing |
|---|---|
| Author: | Chapman, Parke |
| Publication: | Real Estate Weekly |
| Article Type: | Brief Article |
| Geographic Code: | 1USA |
| Date: | May 15, 2002 |
| Words: | 229 |
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