03/08/2022 | by

The jobs report for February contained several positive surprises, both for the macro economy and also for commercial real estate and REITs. The biggest news was that payroll employment rose 678,000 last month, which was well above consensus expectations and continues a string of strong job market gains. Robust job growth bodes well for the economic recovery during a period of heightened concerns about geopolitical risks and the likelihood of future monetary tightening.

There was also good news on several fronts for office, retail property, lodging/resorts, and industrial/logistics real estate markets:

Return to Office rebounded in February

Office: The return-to-office rebounded last month from the setback that occurred in January due to the omicron surge. The Department of Labor’s special question on pandemic-related employment trends in the monthly household employment survey showed that over 3.4 million workers who had gone back to telecommuting during January were back in the office in February. Fewer than 20 million workers are currently telecommuting because of the pandemic, compared to a peak of 46 million in May 2020.

Payroll Employment

Retail real estate: Retail trade added 36,900 jobs, with significant gains in employment at department stores. This new hiring is in response to the shoppers that retailers are seeing return to brick-and-mortar store locations as the rate of new cases of COVID-19 moves lower. A sign of the recovery by brick-and-mortar retail is that employment in January and February has moved back (slightly) above the pre-pandemic peak (Chart 2, dark grey line).

Lodging/resorts: Accommodation and food services added 151,000 jobs, indicating that revival in the hotel, restaurant and bar sectors. Total employment in accommodation and food services has risen 50.0% from its low point in May 2020, although despite this rebound it employment is still 8.8% below its pre-pandemic peak (light blue line).

Industrial/logistics: Transportation and warehousing added 47,600 new jobs. The largest gain within this sector was in the warehouse and storage subsector, which includes the logistics facilities operated by REITs. In addition, employment rose for air and truck transportation. These are the workers who deliver goods through the supply chain, and rising employment in all components of transportation and warehousing is good news for the overall economy as well as industrial real estate. Employment in transportation and warehousing is 10.1% above its level in February 2020 (light grey line).

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