4 minute read time
November 6, 2020

Executive Summary

  • The U.S. added 638,000 jobs in October vs. expectations of 530,000.
  • The unemployment rate declined by 1 percentage point to 6.9% and the labor participation rate increased by 30 basis points (bps) to 61.7%.
  • Retail-oriented jobs continued to have strong gains, including traditional retail and food & beverage. Professional & business services also had a sizeable gain—a positive for office demand.
  • The economic recovery remains on track but is expected to slow in Q4 amid rising COVID infections and delayed additional federal stimulus.
  • CBRE expects economic growth will pick up in 2021 with a medical resolution to the pandemic and additional fiscal support. Property markets, particularly office, retail and hotels, will lag the broader recovery.

Commercial Real Estate Highlights

  • Office: Employment in office-using sectors increased by 239,000 jobs in October. Professional & business services added 208,000 and financial activities gained 31,000. While this growth is a positive indicator for office demand, CBRE does not expect a noticeable recovery of the office market to begin until H1 2021 if a proven vaccine is widely distributed and allows office occupancy levels to improve, particularly in dense central business districts.
  • Industrial: Warehousing & storage jobs increased by 28,100 in October, while manufacturing gained 38,000. E-commerce and a resilient consumer will continue to fuel strong demand for industrial & logistics space, further cementing the property type’s position as the most resilient during the pandemic.
  • Retail: Solid job gains occurred across retail sectors in October. Food services & drinking places gained 192,200 jobs. The broader retail sector gained 103,700. This is additional evidence of a consumer-led economic recovery. Nevertheless, the retail property market’s recovery will not fully commence until health concerns are allayed and social restrictions are fully lifted.
  • Construction: Supported by ultra-low interest rates, the construction industry gained 84,000 jobs in October. Job growth was strong across both residential and nonresidential categories and specialty contractors. Demand for suburban single-family homes was very strong.
  • Health Care: Health care added 58,300 jobs in October. Nursing & residential care was the only sector with job losses (-8,600). Ambulatory health care services, which include doctors’ offices, outpatient care, laboratories and home health, gained 50,700 jobs. Hospitals gained 16,200 jobs.
  • Multifamily: Continued job gains support multifamily fundamentals, but additional federal aid is needed to ensure renters affected by the pandemic can continue making rent payments. Federal efforts to prevent evictions, coupled with the expiration of enhanced unemployment benefits, will be a risk for the multifamily sector over the near term. High-density urban multifamily demand will remain subdued due to restrictions on mobility and use of city-life amenities.
  • Hotels: The hotel sector remains hard-hit by greatly reduced levels of business and leisure travel. Accommodation services gained 34,200 jobs in October. CBRE expects that overall hotel demand will not fully recover until 2024, though certain subsectors will outperform. Hotels will continue to be affected by fewer business and international travelers, while those in “drive-to” destinations will see a greater degree of recovery from domestic leisure travel. Recent reopening of leisure travel to Hawaii will be a good test case of travel resumption effects.

The Bottom Line

The October jobs report exceeded expectations and affirmed that the economic recovery continues. However, there remain nearly 10.1 million fewer people working than in February. Additionally, there is some downside risk in Q4 2020. A rise in COVID-19 infections may lead to renewed economic headwinds, and the delay in additional federal aid could limit near-term growth.

Senate Majority Leader Mitch McConnell has called for additional fiscal aid to be passed during Congress’s lame duck session, which would provide some upside potential to current growth expectations. In any event, additional fiscal support to aid the economy is expected by Q1 2021 at the latest. Along with a proven vaccine and therapeutics, this should ensure a strong and durable recovery.

The commercial real estate recovery will lag that of the broader economy, particularly for the office, retail and hotel sectors. Nevertheless, CBRE expects that a strong economic rebound in 2021 will bring about material improvement in these sectors, although the retail and hotel sectors may take more than two years to fully recover.


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