WASHINGTON, DC–In theory job growth is a reliable indicator for future office space demand. Unfortunately for the Washington DC area, this link is no longer so clear cut, at least for this particular cycle.
“We have had fairly robust job growth, but it is not translating very well into office demand growth,” CBRE Research Manager Wei Xie tells GlobeSt.com. The reason is clear: the area is still working through shadow vacancy. Also, Xie says, workplace strategies and design changes are still having an impact. For these reasons, she says, “it's going to become more and more difficult to predict demand” using traditional metrics such as job numbers or job number projections.
Further muddying the picture — at least in terms of predicting office demand — there are signs that growth for the region will remain flat, as the Washington Leading and Coincident Indices have started to moderate. Says Newmark Knight Frank in a recent report:
This suggests that the current pace of growth will carry into the beginning of 2018, which would lend credence to the consensus of economists who predict that the next downturn will occur in late 2018 or 2019.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
