Real estate is about location, location, location, just as the economy is about jobs, jobs, jobs.
One would say that New York City certainly has the former and, going by the latest employment reports, it has a growing number of the latter. The April figures are out, and NYC gained 18,000 private sector positions for the month. This was welcome news after a healthy March and January but lousy February (the lingering effects of a strike were the partial cause of that poor showing). There are now a whopping 3,396,700 people employed in the private sector in NYC.
This, my friends, is a new high (records in this range go back to 1990).
Of course, much of the job recovery has taken place in non-office sectors. Trade (retail) hasn’t missed many beats since the beginning of 2010; health services have continued to strengthen; and although there have been a few blips over the past year due to inclement weather, all one has to do is walk through Times Square at any time, day or night, to see that leisure and hospitality is alive and well in NYC.
But if you are reading this right now, I would assume you are focused on commercial real estate. So let’s bring it home and talk about office jobs. Professional and business services, financial activities and information services closed out April at 1,252,500 positions. That is a bounce of 102,400 from its post-recession low-point in August 2009. In addition, we have also just surpassed our previous high recorded in April 2008. That said, NYC is still 45,900 office jobs shy of the peak recorded in January 2001. The office jobs that have been created are not “across the board.” Up to this point, the financial activities (securities) segment, along with information services (non-internet publishing), has struggled, although there has been a bit more spark just over the past two months. The real winner has been professional and business services, thanks to technology and media growth as well as a rise in temporary workers.
So when is this serious job growth going to turn into some serious positive absorption? Well, that is the (multi)million dollar question. Tenants are taking less square footage per employee these days—looking for efficiency wherever they can find it (making use of underutilized spaces or redesigning work areas, for example). Offsetting this somewhat are factors such as atypical industries taking space in office buildings (education and health care, for instance) in addition to ongoing residential conversions. NYC has the location, and it is certainly adding the jobs—but expect it to take more of those jobs than it did in the past to bring the market back to what one might call equilibrium.