Real Estate Employment Sees Modest Decline in April

Much like the stock market in recent weeks, job postings in Commercial Real Estate were down in April. This is leading many analysts to wonder if the modest growth the industry experienced this spring was sustainable or whether it was artificially induced by outside factors like the first-time homebuyer tax credit.

Although residential development accounts for only a small portion of the Job Barometer compiled by the Program in Real Estate at Cornell University, it must be looked at as a contributing factor to the rise and fall of the number of real estate jobs.

"We just went through an unprecedented housing cycle," said Lawrence Yun, chief economist for the National Association of Realtors. "[Housing] appears to be stabilizing…but it still faces headwinds in terms of the tax credit no longer being available and mortgage rates possibly rising.”

Additionally, many economists warn that the tax credit probably “pulled forward” sales that might otherwise have occurred later this year. As a result, most analysts think sales will drop, at least temporarily, in Q3 and Q4 to correct for the housing credit. The Job Barometer Team at Cornell will monitor this closely to see what effect this has on Commercial Real Estate job postings in the Residential Development sector going forward.

One of the areas that the Cornell Job Barometer research team routinely codes each month is job postings according to sector, which sheds more light on those that are expanding or contracting. After removing job postings which did not specify a sector, the banking sector accounted for more than 30 percent of all job postings in April (see Figure 2).

While there is no differentiation in our analysis between “commercial” and “residential” lending, much of the dominance of job postings in the banking sector can be attributed to financial institutions hiring employees to cover two areas, the run-up in residential home purchases due to the recently expired new home-buyer tax credit referenced above, and the hiring by banks to cover their needs in the workout and restructuring of commercial real estate notes that are set to come due in the next two years (Figure 3).

This can be construed as positive or negative news depending on your definition of job growth. While both of these job descriptions seem to fill a specific need today, there is no guarantee that these positions will have a long-term positive impact on job growth. Much of that depends on whether or not the recent run on home buying was a fluke and whether or not the economy recovers in a way that lenders are not forced to continue to work out and restructure their troubled loans.

If the Commercial Real Estate industry expects to have sustainable job growth, opportunities in single-family, multi-family, retail, and office need to experience the same type of growth that the banking sector has experienced this year. Growth in these core asset classes not only provide stable jobs in Commercial Real Estate, but represent a healthier economy as a whole.

The Job Barometer is a partnership between the Cornell Program in Real Estate and SelectLeaders, the leading Real Estate Job Site Network, and produces monthly updates and an annual report detailing the climate of the U.S. commercial real estate job market. The Job Barometer team comprises graduate students in the Cornell Program in Real Estate.

Cornell University’s Program in Real Estate is home to the Masters of Professional Studies in Real Estate degree, a comprehensive, graduate-level curriculum that educates the next generation of real estate industry leaders. Cornell is also home to the Cornell Real Estate Council, an extensive network of over 1,400 real estate industry leaders, as well as the annual Cornell Real Estate Conference, now entering its 28th consecutive year.

Author: Sam Bechthold, Graduate Student in the Program in Real Estate, Cornell University