Real Estate Jobs Report Summary
- Commercial real estate employers struggle to find workers to meet their labor demands
- The post-recession housing market has bounced back
- The interest rates set by the Federal Reserve will impact the real estate market
- New regulatory policies are expected to slow down growth
- Millennial debt from student loans may prevent home ownership
- Entrepreneurship filling the demand for new office space
How was 2015 for Real Estate Jobs
2015 proved to be a great year for the real estate sector of the economy as home sales had its best year since the recession, but it would require short-term memory loss to be too optimistic about the economic outlook for the housing market. After the recently experienced housing bubble, it is doubtful the same policies will be in place for the U.S. to experience the same economic growth rates in the real estate sector that led to the bubble and the subsequent economic collapse last decade.
Anticipated policy changes that will affect the housing market include Federal Reserve rate hikes as well as the Truth-In-Lending Act and Real Estate Settlement Procedures Act. However, an improving job market has driven consumer spending in the real estate sector and as long as the U.S. job market recovers from recession woes we can expect to see this consumer spender to continue to drive growth.
Of course the real estate sector of the economy is comprised of more than just residential housing and also includes commercial and industrial real estate. These fractions of the real estate sector also had a decent year in 2015; there was a 10% increase in commercial construction last year alone giving way to higher labor demands and growth in the job market. Growth in the job market is making it harder for firms in the real estate sector of the economy to meet their labor market demands.
The real estate pricing trends in major cities show industrial and residential properties are becoming increasingly valuable while office spaces are not rising in value. The price of retail property has also experienced up and down trends. These price changes are a reaction to the dynamic nature of the economy as many factors influence the real estate sector’s economic outlook.
Real Estate Jobs For 2016
Although a growing job market and better economic outlook post recession has helped grow the real estate sector of the economy, future loans may be harder to acquire which could hamper growth in the residential sector. The combinations of new regulations reacting to the collapse of the housing bubble and growing student loan debt are likely to decrease the amount of people eligible for loans to obtain home ownership.
Additionally, pending interest rate hikes from the Federal Reserve will increase the price of mortgages making it more expensive to buy homes and finance larger scale, industrial projects. This means some firms may have missed their window of opportunity to afford real estate development and will result in less commercial growth as the price to do so is rising.
The new prominence of online shopping and e-commerce has lead to the diminishing of traditional retail. This creates a greater demand for warehouses and distribution centers that will help fuel the commercial industry in the real estate sector of the economy. The continued expected growth in this market will make it even harder for firms that struggling to alleviate their labor shortages.
According to an AGC survey from September of 2015, 86% of the 1,358 respondents said their firms were having trouble filling hourly craft and/or salaried positions. This is great news for job seekers in the construction market, but potentially harmful for economic growth as firms are unable to achieve their desired production.
While there is a greater need for warehouses and other buildings for commercial use, the rise of online shopping could hamper the need for retail property. As traditional retailers are being replaced by e-commerce, we can expect to see a fall in the demand for retail property.
Where is the Real Estate Jobs Growth?
The struggle of employers to meet their labor demands alludes to growth being constant for the commercial real estate sector of the economy. Additionally, it is expected that e-commerce will continue to grow as we can see with the success of Amazon and other online stores that are changing the retail market. This growth will fuel the commercial aspect of the real estate sector in the U.S. economy. Conversely, the lack of labor available to fill the high demand of this industry will adversely affect growth, so the numbers will likely be lower than they ought to be.
As more people continue to enter the labor market we can expect housing consumption to increase because more people will be able to afford to buy homes. Mortgage rates have yet to increase in 2016 and if that trend continues we can see continued growth in the housing market.
Real Estate Job Market Challenges
A new regulatory environment will change the availability of mortgages and possibly slow down new home production. It is also unlikely many millennials will be able to afford or qualify for mortgages for new home purchases as many of them are burdened with student loan debt. Lastly, interest rates have nowhere to go except for up, so future loans will invariably be more expensive than they are now making home ownership more expensive. This will also raise the cost of large-scale projects which could harm the industrial side of the real estate sector.
With new entrepreneurship and the success of startups such as WeWork, the commercial real estate industry may experience creative destruction as new startups look to eliminate the need for firms to purchase office space of their own.