**Can Weak Job Growth Benefit Commercial Real Estate?**
Job reports from the Bureau of Labor Statistics (BLS) have painted a concerning picture of the U.S. economy in recent months. Only 22,000 jobs were added in August, and prior estimates for June and July were revised downward by a combined 21,000 jobs. Additionally, job creation between April 2024 and March 2025 was revised down by a staggering 911,000 positions.
While these figures are subject to further revisions ahead of the next major release in February 2026, they already raise red flags. “All these indicators are telling us that the U.S. economy is weaker than we thought,” said John Chang, Senior Vice President at Marcus & Millichap. “The combination of elevated uncertainty and heightened caution will likely continue to weigh on the employment market.” He also noted that the likelihood of a recession in the coming year could be higher than previously assumed.
**The Silver Lining?**
Despite weak job growth, there could be positive implications for commercial real estate (CRE). In Marcus & Millichap’s video report, *CRE at a Crossroads: Jobs, Rates and Market Liquidity*, Chang explained that the Federal Reserve, which is tasked with supporting employment and managing inflation, may act in ways that ultimately help real estate markets.
For the first time since December 2024, the Fed cut the Effective Federal Fund Rate (EFFR) by a quarter point on September 17. Central bank officials also hinted that two more rate cuts may be on the horizon by the end of the year.
“It’s widely believed that the Federal Reserve will reduce the overnight rate by 75 basis points by the end of the year, bringing it down to about 3.5%,” Chang explained.
If this pans out, it could place downward pressure on the 10-year Treasury yield, which has already fallen to roughly 4%. This environment could make more properties financially attractive to investors.
Moreover, lower interest rates would likely push more real estate assets into “positive leverage” territory, where returns exceed borrowing costs. This could begin to unlock stagnant deal flow and improve transactional liquidity — as long as borrowing costs remain manageable.
**A Word of Caution**
However, Chang emphasized that Treasury yields and EFFR do not always move in sync. “When the Fed cut rates by 50 basis points in September 2024, Treasury rates actually went up,” he noted. A similar reaction occurred when the central bank implemented a 100 basis point cut at the end of the year — the 10-year Treasury yield rose from 3.7% to 4.6%.
Also, a lower cost of capital doesn’t automatically translate to higher property values or lower cap rates. Persistent uncertainties around federal policy and international trade also muddy the short-term outlook for investors.
**Returning to Optimism**
Despite the current volatility, Chang offered a more optimistic long-term forecast. As the EFFR declines, “well-priced assets have a higher likelihood of clearing the market,” he said. Additionally, a shrinking construction pipeline should support supply-demand dynamics, ultimately benefiting long-term occupancy rates across the commercial real estate sector.
Still, Chang concluded with a note of caution: “We are in a very fluid economic cycle and things can change quickly.”
