In December 2024, the Bureau of Labor Statistics (BLS) released employment numbers showing a gain of 256,000 jobs in the economy. The unemployment rate remained at 4.1%, and overall payroll employment increased by 2.2 million throughout the year. While this was lower than the increase seen in 2023, it still indicated ongoing economic growth.
A recent report from Marcus & Millichap discussed how these job gains would impact commercial real estate positively and negatively.
On a positive note, most of the hiring activity in 2024 occurred within education and health services sectors which will benefit multifamily and retail properties due to an increase in high-wage positions. This also indicates continued demand for medical office spaces.
However, there was a decline in manufacturing hiring which could potentially have adverse effects on industrial properties as well as slower net absorption rates due to oversupply issues. Fortunately, experts predict that supply pressures should ease up by next year with fewer developments underway.
One major concern raised by this optimistic jobs report is how it may affect interest rates set by Federal Reserve actions concerning Effective Federal Fund Rates (EFFR). With improved job growth and low unemployment rates along with inflation remaining steady at around high-2%, there is less likelihood of any Fed rate cuts happening soon according to analysts at Marcus & Millichap.
This means that unchanged overnight lending rates could lead to upward pressure on Treasuries – as seen when yields on ten-year notes reached their highest point all through last year hitting an impressive figure of over four percent during early January.
If sustained over time , this trend may hinder investment sales since long-term commercial real estate mortgages are likely going be impacted significantly .
