A new report released by Cushman & Wakefield addresses the impact of the recession on different cities in North America. The downturn had varying degrees of impact on cities across the US. Some highlights:
- The report proclaims that the US economy is in recovery and that employment has “finally turned decisively upward” (related post – see Our Most Important Measure blog post on this site). Also regarding employment; “Non-farm payroll employment has increased in three of the last five months jumping by 162,000 in March, the largest increase since March 2007.”
- Federal government employment actually increased by 0.4% since the recession began which resulted in a strong market in Washington D.C. but not in LA. State and local government employment is down modestly.
- Both manufacturing and construction industries were hit particularly hard in this downturn.
- In a contrarian message, a number of cities that were expected to see large job losses due to large concentrations of financial services firms actually faired very well. “New York and Boston were among the best performing cities during the recession.”
- In another bright spot the report suggests that 2009 new construction completions represented only 1.3% of inventory compared with a huge 3.2% in 2001. There is not as much slack in the rope this go around.
While the recession felt very different in Detroit than it did in Washington, D.C., United States real estate markets are in much better condition than one might expect given the severity of the recession and the largest decline in unemployment in seven decades.
Nationwide, this is clearly still a tenant’s market and it will be for sometime. The focus now for tenant side real estate executives who have lease expirations or expansions should be maximizing concessions before landlords take the notion of recovery seriously.
Landlord pricing rarely jumps precipitously. Instead, this is a game of a thousand cuts in which concessions are gradually reduced, annual escalations increased and finally asking rates raised. Tenants can be lulled to sleep by the notion that the market is so bad that they have plenty of time before needing to worry.
While we need to first do what is right of the business and not the real estate, we advise keeping a close eye on the real estate market fundamentals so tenants can strike while the proverbial iron is hot.