Features

Total U.S. nonfarm payroll employment rose by 126,000 in March, according to the Bureau of Labor Statistics (BLS), ending a string of 12 consecutive months of job gains above 200,000 and falling well short of the 245,000 jobs projected by Bloomberg’s survey of economists. The BLS also revised its figures downward by a combined 69,000 jobs in January and February. Ryan Severino, senior economist and director of research at Reis, says that despite the tepid job growth figure for March — which is still subject to revision — the overall trend is positive for commercial real estate. “The ongoing increases in hiring for business and professional services are a good sign. These tend to be higher-value jobs that create demand for commercial real estate over the long run,” says Severino. “Year to date, job creation per month is above last year, which was the best year for the labor market in terms of jobs created since 1999.” During the first quarter of 2015, nonfarm payroll employment has increased an average of 197,000 monthly, up from 193,000 during the same period a year ago. In March, the largest job gains by sector were professional and business services (+40,000), followed by education …

WASHINGTON, D.C. — Although net absorption slowed in the first quarter of 2015, demand for office space remained consistently strong enough to push rents upward in over 70 percent of the country, according to commercial real estate services firm DTZ. The U.S. office market absorbed 10.6 million square feet of office space in the first quarter of 2015, down 5 percent from the same quarter one year ago. Despite the deceleration, net absorption has remained positive for 20 consecutive quarters. The U.S. vacancy rate tightened by 10 basis points from the previous quarter to 14.4 percent in the first quarter of 2015. Out of the 80 metros tracked by DTZ, 60 reported occupancy gains, while 20 reported occupancy losses. Kevin Thorpe, DTZ’s chief economist for the Americas, says that the slowdown in absorption was expected and can mostly be explained by seasonal factors. “For six years in a row, absorption levels have been weakest in the first quarter of the year,” says Thorpe. “The weakness is simply a function of weather, budget cycles, and other seasonal data quirks. It has never amounted to a sustained down trend. Looking past seasonal volatility, job growth in most office-using sectors is as robust …

CHICAGO — Building revenue and demand for new commercial construction may be rising fast, but so are costs. Profitability for new commercial building projects will be tricky in 2015, as soaring demand may not lead to soaring profits, according to a new JLL report on U.S. non-residential construction activity. “Leasing momentum is boosting construction demand across multiple commercial property sectors — but raw material and labor costs are making it more expensive to get out of the ground than ever before,” says Todd Burns, president of JLL Project and Development Services for the Americas. “Demand is exploding, but demand isn’t everything. You have to consider the bottom line of every project to make sure it makes economic sense short- and long-term.” Affirming rising demand, the consensus forecast of the American Institute of Architects calls for spending on non-residential construction to rise 7.7 percent in every commercial property sector this year. Likewise, the Construction Backlog Indicator, which tracks non-residential construction, hit a post-downturn high of 8.8 months in the third quarter of 2014. The JLL report highlights several trends to watch this year on the construction front: • Recovery Continues, Backlog Builds — The overall value of buildings constructed has continued …

PORTSMOUTH, N.H. — The average sales price per room for U.S. hotels in 2014 was $156,002, up a whopping 20.6 percent on a year-over-year basis. According to Lodging Econometrics (LE), the healthy increase stems from record-setting hotel revenues and profits, low interest rates and the availability of attractive financing terms. LE reports that the total investment in the U.S. lodging industry was an estimated $30.8 billion last year. In 2014, of the 1,292 total hotel assets that transacted or transferred ownership, 935 reported a sales price. The Portsmouth, N.H-based firm anticipates that hotel prices will accelerate for the next several years as hotel performance continues to shine in the absence of any significant new supply. A critical part of the equation is that interest rates, although expected to rise, still remain attractive causing competition to intensify for prized single assets and portfolios. Since the market bottomed out in 2009 with 528 total transactions, deal volume over the last five years has ranged between 1,261 and 1,457 transactions. It is a narrow range far distant from the 3,218 transactions and transfers reported in 2007, according to LE. There were 799 single-asset transactions and another 481 hotels that changed ownership as part …