America’s “Labor Shortage” Is Not What It Seems

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America’s labor markets have been transforming in myriad ways since the onset of the pandemic. Just about every important labor metric is out of whack: job quits, new hires, and job openings are all at record levels, while the number of jobless workers available to fill open positions is at historic lows. It all adds up to a frustrating shortage of workers for U.S. employers.

In the first part of a two-part article, I explain what’s causing the labor shortage and why it’s unlikely to ease anytime soon. In the next article, I look at how the shortage is shifting the balance of power from employers to workers, and what it means for wages and working conditions.

Read my article in Dialogue & Discourse on Medium here.

“Emerging Trends in Real Estate 2022” Released

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I’m proud to have served as the lead writer for “Emerging Trends in Real Estate 2022” jointly released last week by the Urban Land Institute and PwC. Key themes in this year’s report: “Surprising Resilience, Booming Economy, Worrying Risks.” Following tradition, the report lays out ten top trends of relevance to the property sector including the impacts of working from home, growing climate change risks, and the changing urban landscape.

As is its hallmark, the report relies on interviews with industry leaders and experts to inform the analysis. “The theme that emerged more than any other during our interviews . . . was the surprising resilience of the economy and of property markets generally, inspiring greater confidence in our collective capacity to adapt to changing market conditions and future unknown risks.”

I also returned as the author of the retail property sector section, where I’m pleased to report that “the retail sector managed to survive the pandemic recession largely intact, if not quite the same.” Much has changed over the last 18 months, some accelerating trends predating the pandemic, some new developments. As I conclude: “In accelerating needed change, the pandemic perhaps forced the retail sector to confront intractable problems sooner, putting it on a better trajectory. But retailers and owners won’t have long to rest. More change is coming.”

I extend my appreciation to all the industry people who generously shared their insights with me. And special thanks to the report’s co-editors Anita Kramer of ULI and Andrew Warren of PWC who wisely guided the process and shaped the content.

A report overview and download is available on ULI’s website (gated for ULI members) here.

A summary of the report’s findings may be found on PwC’s website here.

Finally, the report is available for free download on PwC’s website here.

Staying Close to Home

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Americans didn’t move far, but property market impact may be profound

Newspapers last spring were filled with stories of empty downtowns as firms converted overnight to remote working, freeing office workers from the grind of their daily commutes. Not needing to report to the workplace, countless office workers, especially in tech and finance, moved to smaller communities where initial COVID infection rates were lower and housing more affordable.

But what is being reported isn’t always the reality. So how do we learn what is really happening to our cities’ populations? Did masses of people really abandon San Francisco, New York, and other leading metros in favor of greener and less expensive areas? Well, like any good story, it’s complicated.

Read my analysis in Propmodo.

Office is the New Retail

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A Dynamic Property Sector Faces Painful Adjustments and a Bifurcated Recovery

Despite wholly different market dynamics, the office property sector is confronting some challenging adjustments coming out of the pandemic that eerily mirror those buffeting the retail sector.

American office workers are preparing to venture out from their home offices and return to their company offices. But the workplace will not be the same. Most of us won’t be commuting in every day. More of us than ever before will rarely return to the headquarters. And many central headquarter offices will go away, replaced by smaller, more dispersed offices.

This reality invites the disingenuous strawman argument from some that “the office is dead.” It’s not, not nearly, and no one seriously believes it is. But the industry does face some daunting challenges that promise to alter fundamental market dynamics.

Read my article published in the Counselor of Real Estate’s Real Estate Issues journal here.

What California’s and Florida’s COVID-19 infection rates tell us—and don’t tell us—about the effectiveness of public health interventions

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Too often the amusing anecdote or the obvious comparison are more misleading than meaningful

Ever since the widespread lockdowns last spring, there’s been pitched political debate over how much government should be doing to slow the spread of the novel coronavirus. Last month several media stories comparing the COVID-19 experience in California and Florida seemed to capture the flavor of that controversy.

As it happens, the caseload in California ranks on the high side of “blue/blue” states (states that voted Democratic in 2020 and have a Democratic governor) while Florida’s caseload is below average for “red/red” (states that voted Republican in 2020 and have a Republican governor). We can speculate as to why, but neither state is typical of the red-state vs. blue-state paradigm for public health interventions.

For all the glitter of a California versus Florida comparison, it really doesn’t tell us much at all.

Read my analysis on Politically Speaking on Medium.

The High Price of Opportunity Zones

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A rigorous new study has concluded that Opportunity Zones are not fulfilling their promise, inflating residential prices without expanding investment in the designated areas.

By using an enormous database of residential sales transactions the real estate data management and analytics company Cherre Inc, along with outside academics, has undertaken the most comprehensive analysis yet of opportunity zone property market dynamics.

They determined that the program did not significantly increase transaction volumes but did raise real estate prices in designated areas by four to six percent over properties in comparable neighborhoods not included in the program.

My overview of OZ’s history and review of the new study in Propmodo.

A Most Unusual Recession – A Mostly Typical (If Protracted) Recovery

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When the U.S. economy first went into a tailspin in March as the country entered lockdown, initially there was hope for a “V”-shaped recovery – that the economy would come back as quickly as it had declined – once businesses could safely reopen and people could resume their everyday routines. Indeed, that was the premise of the first pandemic relief bill: to tide over households and businesses until the economy could safely restart.

But that scenario was never realistic. Such a prospect depended, of course, on controlling the coronavirus. However, the pandemic never fully receded but instead ebbed and flowed, with each wave of infections decidedly worse than the one preceding. So, while most businesses were able to reopen, whole swathes of the economy remained shuttered, limiting the recovery. More importantly, most consumers did not feel comfortable undertaking everyday activities like eating in restaurants, shopping in a mall, or even returning to work, further undercutting and postponing the recovery.

How has the recovery been proceeding? Key findings from my analysis:

  • The initial downturn was unusually swift and deep, as was the initial recovery, but the recovery path is reverting to more typical patterns as the expansion has lost momentum.
  • New forecasts from the Congressional Budget Office predict that GDP will return to its pre-pandemic peak by this summer, though jobs won’t regain their former peak for three more years.
  • Even after we regain the output and jobs lost during the recession, we will still suffer a deficit relative to what might have occurred absent the pandemic and the ensuing.

Read the full article on Seeking Alpha.

More Retail Pain Before Real Gains

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The coronavirus still controls the economy. As COVID-19 cases began surging again in mid-September, the recovery inevitably began to slow. I made two main economic predictions this fall. First, that labor market conditions would deteriorate, with actual job losses likely. Second, that holiday retail sales would be underwhelming, particularly in malls and community shopping centers. The two are related, and both came to pass. Even with unprecedented financial support from the Federal government – actually raising personal income during a recession – retail sales were destined to decline if consumers could not count on their next paycheck.

The key findings:

  • In-store holiday sales were the weakest in over a decade as consumers avoided physical stores and services, compounding retailers’ financial woes.
  • The latest COVID relief bill and the likely next round of funding from the Biden Administration will help cushion the retail distress, but many more store closures and retailer bankruptcies.
  • Pent-up retail demand—when finally realized—will provide a welcome boost for the sector but will recoup only a small share of the sales foregone in 2020, particularly for service-based retailers.
  • Today’s vacancies will present tomorrow’s opportunities for enterprising retailers and strong landlords. But rebuilding will take time.

You can read the full article on Seeking Alpha.

Three Startling Findings from My Deep Dive into COVID’s Spread Across America

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The coronavirus pandemic in the U.S. originated in the nation’s densely populated, left-leaning urban communities but spread to increasingly less dense suburban and then rural regions, where the politics tend to lean right. My detailed analysis of COVID data provides clear evidence of the striking shift in the infection’s political colors–and demonstrates that the migration from blue to red America was more extreme than would be implied by geography alone. Instead, politics and related social attitudes bear much of the blame for COVID’s greater and more deadly march through red America.

#1: COVID-19 infections were initially concentrated in Democratic-voting counties, but the share of infections in Republican counties now closely mirrors its underlying population share.

#2: Population Density Explains Part of the Partisan Split in COVID Cases. But We Must Also Blame Politics and Related Social Attitudes.

#3: COVID’s Charge Through Red American Has Been More Deadly

My revised deep dive is published on Medium.

What Can Commercial Real Estate Expect from the Biden Administration’s Economic Policies?

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President-elect Biden’s policies will depart materially from those under the Trump Administration. In my first article on the Biden economic plan, I examined the potential impact of Biden’s expected tax proposals. In this article, I explore the expected spending priorities and regulatory approach, as well as the broader economic climate.

Read my analysis on Propmodo.