A solid labor market could lift the commercial real estate market as 2024 comes to an end. Hiring reached a six-month high in November as job creation rebounded from disruptions related to weather and labor relations in October, according to a report from Institutional Property Advisors.
The economy added 227,000 new jobs in November, on its way to an expected year-end total of more than two million new employment opportunities, the report said. Although this figure beat expectations, the unemployment rate ticked up 10 basis points to 4.2%.
During the second half, an average of 131,500 positions per month were added, which is below the average of 191,000 from the first nine months of the year and from what was typical in the pre-pandemic period.
In the office sector, stronger absorption indicates hiring activity in November and traditional office-using sectors had favorable employment figures. The professional and business services sector added 26,000 jobs, erasing a decline of 23,000 positions in October. Headcount in the information segment held flat, an improvement from a decrease the prior month, and financial activities firms saw their best month of hiring since July 2023, according to the report.
“These trends bode well for the office sector after the third quarter reported the strongest 90-day period for the property type’s net absorption since the end of 2021,” the report said.”This boost helped the national office vacancy rate hold steady year over year for only the second time in the post-pandemic era.”
The multifamily sector also is set for improved performance in 2025. The education, health services and public sectors added a combined 112,000 jobs last month, which supports consumer activity and demand for housing. This is reflected in apartment absorption reaching its third-highest level on record. While renter demand is somewhat slower for the year, fewer deliveries are expected, which should help improve both vacancy rates and rent growth, said the report.
The November employment report increased the chances that the Fed will act to cut interest rates further this month, the report said. The Fed meets again on December 18. Meanwhile, the prospect of tariffs on imports from Mexico and Canada could raise short-term inflation pressure.
“Yet, bond yields in recent weeks have trended lower,” Institutional Property Advisors wrote. “The 10-Year Treasury yield has dipped about 30 basis points from its post-election peak to around 4.1 percent. As a common lending benchmark, if this trend continues, it could help some commercial property transactions pencil.”