3 minute read time
May 8, 2020

Executive Summary

  • A staggering 20.5 million jobs were lost in April, marginally better than consensus expectations of 21.5 million.
  • Approximately 78% of the total unemployed were reported as “furloughed” or “temporary,” indicating many of these jobs could return once the economy fully recovers.
  • The unemployment rate more than tripled to 14.7%, while the labor force participation rate decreased by 2.5 percentage points to 60.2%.
  • The unprecedented impact of COVID-19 has pushed the unemployment rate to a post-war high.
  • Job losses occurred across all sectors, indicating impacts across all commercial property types.

Commercial Real Estate Highlights

  • Office: Office-using sectors lost nearly 2.4 million jobs in April. Financial activities lost 262,000 (the bulk of those in real estate) and professional & business services lost 2.1 million (more than half of those in administrative & waste services). Higher-paid professional & technical services saw a major decline as well, indicating a broad hit to office-using demand.
  • Industrial: Warehousing & storage jobs decreased by 74,100 in April and the manufacturing sector lost nearly 1.4 million jobs, reflecting broader slowing of the economy and forced closures. However, the industrial sector remains resilient and will be boosted over the medium term by e-commerce demand and improving economic conditions.
  • Retail: The retail sector has been the hardest hit by stay-at-home orders and forced store closures. Food services & drinking places lost almost 5.5 million jobs in April, while the broader retail sector lost 2.1 million jobs. Not all of these jobs are expected to return, and recovery will be slower than for other sectors.
  • Health Care: The health-care sector lost more than 1.4 million jobs in April—a seemingly odd occurrence in the midst of a public health crisis. Job losses were highly concentrated in ambulatory health services (outpatient services), but hospitals also lost jobs. These losses resulted from preparations for a much larger volume of COVID-19 patients, which required shutdowns of certain non-essential medical services.
  • Multifamily: Household formation and demand for apartments will decrease due to job losses. Once the economy stabilizes and job growth returns, multifamily demand should improve. The seniors-housing and student-housing subsectors will be particularly dependent on a medical resolution to the disease.
  • Hotels: The hotel sector has been hit hard by the cessation of non-essential travel, with accommodation services losing 839,000 jobs in April. Negative impacts on the sector will continue until travel bans are lifted, with drive-to vacation destination hotels expected to bounce back first.
  • Construction: The construction sector lost 975,000 jobs in April due to forced closures and delays related to COVID-19. Low interest rates and a strong economic recovery expected in 2021 will aid the sector’s recovery.

The Bottom Line

The sharp job losses in the April will go down in history, reflecting the unique economic impacts of the response to the pandemic. While exceedingly severe, there are some important nuances worth noting. For example, the number of unemployed who reported they were temporarily laid off increased by tenfold since March to 18.1 million. While some temporary job losses may become permanent, it appears that many could return once the economy rebounds.

CBRE expects the unemployment rate to peak at 15.2% in Q2 before stabilizing in Q3 and ending the year at 8.7%. Provided reasonable progress is made on effective therapeutics and ultimately a vaccine, a strong economic recovery will be underway by late 2020 and continue in 2021. CBRE expects GDP to fall by 4.9% in 2020 but grow by 6.1% in 2021.

Commercial real estate’s recovery will lag that of the broader economy. The industrial and multifamily sectors should be the most resilient and largely recover within one year, followed by the office sector within two years and the retail sector within three.

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