Labor shortages are stressing many sectors, and commercial real estate is not exempt. According to recent research from the Counselors of Real Estate, 88% of contractors report moderate to high levels of difficulty finding workers. And 35% have turned down work due to labor shortages.
However, while there are certainly labor challenges for the CRE industry, there could be some light at the end of the tunnel this year. Read on for the top labor in commercial real estate trends for 2023, based on the latest data.
1. Fewer people are voluntarily leaving their jobs
As more and more floods news feeds about layoffs in the tech and media sectors, the exodus rate (defined as the percentage of workers leaving the industry when starting a new position) dropped from a high of 67.4% in June 2022 to 60% in January 2023.
By comparison, the real estate industry saw a larger drop in exodus rates – from 52.4% in January 2022 to 46% in January 2023, a 12% relative decrease. That suggests more people in the real estate industry are staying put instead of voluntarily quitting their jobs.
2. Real estate unemployment rate drops
The total number of unemployed people in the United States went essentially unchanged at 5.7 million in January 2023, according to the U.S. Bureau of Labor Statistics (BLS). In January, the number of unemployed people on temporary layoff was 734,000, the lowest since January 2020. The unemployment rate in the U.S. stood at 3.4% in January 2023, the lowest level since May 1969 and below market expectations of 3.6%.
When diving deeper into the real estate sector, BLS data shows the unemployment rate at 2.7% as of January 2023. That’s a drop from December’s unemployment rate for the real estate sector (3.1%).
3. Wages increase double digits for real estate workers
When digging into wages for the real estate sector, BLS data shows hourly earnings have increased by almost 18% from pre-pandemic figures. At the end of 2019, real estate workers earned on average $28.40. By the end of 2022, that figure increased to $33.41.
Wage increases are causing other issues beyond reduced profits. “With wages and the cost of other inputs rising due to shortages, the Federal Reserve has undertaken aggressive monetary actions to tame inflation. So far, the consensus view among most economists is that no recession is imminent, but any action sufficient to temper wage and price growth will surely cool the economy,” Andrew Nelson, real estate economist and consultant with Nelson Economics, recently wrote in the Counselors of Real Estate report.
4. A hot jobs market leads to higher interest rates
Just last week, Federal Reserve officials said the U.S. central bank will need to keep gradually raising interest rates to beat inflation and suggested price pressures driven by a hot jobs market could push borrowing costs higher than they once thought.
“With the strength in the labor market, clearly there are risks that inflation stays higher for longer than expected, or that we might need to raise rates higher,” New York Fed President John Williams told reporters.
News outlets report that interest rates could go up to 5.1% in the near term. The Fed’s policy rate is currently in a 4.5% to 4.75% target range.
5. Sustainability jobs on the rise
“With businesses under pressure to slash their carbon emissions to help tackle the climate crisis, it’s not surprising that one of companies’ most sought-after jobs this year is that of sustainability manager,” writes Rand Ghayad, Head of Economics and Global Labor Markets at LinkedIn.
Companies have announced more than 100,000 clean energy jobs since the passage of the Inflation Reduction Act in August 2022, totaling almost $90 billion in new investment. The Inflation Reduction Act provides tax credits for zero-carbon energy production. It’s projected to cut domestic carbon emissions 40% by 2030.
Sustainability is the word of the year. Not only do sustainability mandates continue to be announced for CRE, but commercial tenants are demanding sustainable buildings. If CRE property teams don’t have sustainability on their radar, now’s the time to formulate a plan.
More resources for CRE property teams
As property teams continue to navigate challenges stemming from labor in commercial real estate, operational efficiency is more important than ever. Property teams should look to automate processes to free up time and resources. It’s all about helping the team members you have to do their jobs quicker without losing any efficiency.
Below are several resources CRE property teams can use as they work toward more efficient building operations: