A new report by JLL points to a looming problem for the commercial real estate market: A labor shortage that leaves vital jobs unfilled and whose effects ripple across the economy.
As of January 2018, a record 6.3 million positions remained open and unfilled in the U.S., says JLL Chief Economist Ryan Severino. Those positions include everything from jobs in high-tech industries to skilled labor such as electricians and plumbers.
And Severino predicts that the problem will only get worse.
How does this affect CRE? Labor shortages result in higher vacancy rates, which drive down rents. JLL estimates that rents for commercial properties could be as much as 5 percent higher if the economy were at perfect employment.
How did we get here?
Here’s what’s driving this historic labor shortage:
*Men’s participation rate in the workforce is dropping – down more than 18 percent over the past 70 years. The problem is most acute among men with a high school education or less, as the jobs they once held are lost to mechanization and off-shoring.
*Women are staying out of the job market, often because of problems related to child care, such as lack of access to paid maternity leave, affordable day care and flexible schedules. “Right now, there are 18 million U.S. women of prime age who are not working,” Severino says. “A quarter of those have at least a bachelor’s degree or higher. That’s a lot of qualified women who could be filling open positions.”
*Workers need more and more extra schooling and certifications to land jobs. Employers increasingly ask for post-secondary degrees for positions that previously didn’t require them. And governments’ occupational licensing demands have ballooned. In 1950, only 1 in 20 workers required a license to work; now, it’s 1 in 5.
*There’s a geographic discrepancy between available jobs and available workers: The jobs aren’t where the people are. This may be because of high housing costs or because government licensing doesn’t transfer well between different states and cities.
Where do we go from here?
Severino identifies several ways to draw more workers into the market:
*Boost educational opportunities – both for college degrees for high-tech fields and for vocational education, especially for workers whose jobs have been lost to automation or sent overseas.
*Make it easier for women to enter (or re-enter) the workforce, by providing paid maternity/paternity leave, affordable childcare, flexible work schedules and equitable wages.
*Help employees move to where the jobs are, including subsidies for housing, relocation and interview costs.
To learn more about how the labor shortage is affecting the market for commercial real estate, download JLL’s “Research Labor Shortage Report: Where are all the workers?”