Where are all the workers?
The U.S. is experiencing the worst labor shortage in history, impacting commercial real estate through lower rents and higher vacancy
America’s labor shortage has reached a record high. It’s a problem that threatens to slow the economy and impact commercial real estate, lowering rents and increasing vacancy across property types.
“Commercial real estate correlates pretty well with the whole economy; their performances are linked,” says JLL’s chief economist Ryan Severino, who authored the report “Where are all the workers? The impacts of a labor shortage in the U.S. and potential remedies.” “CRE would see a boost if open positions were filled, especially in the office market where fewer workers means less demand for space.”
The impact of the shortage is “pretty significant,” Severino says. “If we don’t have enough workers for the demand that’s out there, it really limits the ability of the economy to grow in the short term.”
Skilled workers are hard to find
American companies are adding between 150,000 and 200,000 jobs per month, and roughly 40 percent of employers report struggling to fill those open positions, according to recruitment firm Manpower Group.
The problem is wide ranging, though it most impacts roles that require a lot of education or training; high-level office jobs in IT and tech, and the skilled trades of qualified electricians, welders and carpenters.
The shortage has several root causes. The percentage of prime-age workers that are in the labor force, between ages 25-45, peaked in 1999. The participation rate of women in the workforce peaked a year later, at 60.3 percent. It now sits at a mere 56.7 percent.
Many men with a high-school education or less are finding the roles they would have occupied in previous decades have been automated or outsourced overseas, leaving them with few options for steady employment.
“Men have not bridged the gap between the skills they have and the jobs that exist,” Severino says.
Women are more qualified for the jobs in question — nearly 4.8 million prime-age women who aren’t currently working hold a bachelor’s degree or higher, compared to only 1.7 million men. But many women have been pushed out of the workforce due to a lack of supportive policies in place for parents, including paid leave, subsidized child care and flexible work schedules.
“We trail a lot of the developed world in alleviating these problems, and the fact that we haven’t done so is reflected in the data,” Severino says.
Cause for optimism?
If all the open positions in America were filled with qualified people, the nation’s economy would boom, and commercial real estate would follow suit, with rents rising and vacancy dropping.
“In a good economy, people with high-paying jobs have more income for vacations, which leads to demand for hotels and more demand for apartment units,” Severino says. “They shop more, so there is greater demand for retail space, and by extension, warehouse space.”
At perfect employment, the national office asking rent would rise by roughly 5 percent, and the national office vacancy rate would fall by roughly 2 percent, according to Severino’s report.
Industrial rents would rise about 4 percent, and vacancy would fall about 1 percent. Apartments rents would jump 5 percent and vacancy would drop 1.5 percent. Retail vacancy would dip 1 percent and rents would rise 3 percent.
So what’s the solution?
The role of local, state and federal policymakers is important, particularly when it comes to facilitating paid family leave and increasing access to childcare, as well as creating and promoting training programs for in-demand skilled trades.
Companies who are desperately seeking qualified workers can offer these perks as a competitive strategy.
“It’s incredibly difficult to attract and retain employees,” Severino says. “As the competition intensifies, wages and benefits increase.”
Offering daycare on-site, for example, as an office amenity, can help attract talent.
But not all benefits are created equal.
“Companies need to differentiate between things that are fun and nice-to-have, like indoor slides and nap pods, and real, meaningful things like daycare stipends — those are the things that discriminating employees will look for,” he added.