The 5 Least & Most Impacted Markets From the Office Job Sector
There has been a major impact on employment rates in the US throughout the pandemic, and at times, it’s felt like a bit of a wild ride watching the fluctuating rates month by month. While there is improvement, with the current national average having decreased from 10.2% in July 2020 to now down to 6.7%, understanding the impact on real estate investments, or in my case focusing on multifamily properties, is of paramount importance.
Obviously, the sectors hardest hit from the very beginning were leisure & hospitality, followed by retail, as the entire nation entered lock downs and began adapting to the “new normal” of social distancing. However, one niche demographic of interest is the office job sector, as many companies were forced to implement a remote workforce, meaning the job loss rates have thankfully not been as staggering as their counterparts.
Or have they? One of the reasons this particular sector is of such interest to me as an investor and syndicator of multifamily properties is because my company, Blue Lake Capital, focuses on Class B assets. A majority of our tenant base are part of the workforce within the office job sector; anticipating this trend for 2021 is crucial information in developing and implementing a pragmatic investment strategy, as well as calculating projections for collections, rent increases, returns for my investors, and the overall performance of our investments.
Employment rates impact housing demand, and housing demand impacts the price of asking rents an owner can compete with in a market, as well as vacancy rates. When unemployment rates are low, owners can often drive-up asking rents, as the demand for housing becomes more urgent and competitive amongst tenants. When unemployment rates are high, this will often drive down housing demand, and in turn the asking rents, as operators begin to make concessions as the investment properties compete for tenants. Ultimately, vacancy rates will reflect whether a market is struggling with demand.
By analyzing this data, my team can underwrite more conservatively and assess investing opportunities with a sharper eye, by understanding more clearly what impacts are likely to affect our tenant base. While a strong market and employment rates are always significant factors to consider, honing in on our niche demographics when it comes to our tenant base is an additional step experienced investors know to asses.
So, which markets have unemployment rates in the office job sector, due to the impacts of COVID, been impacted the least and the most? Let’s take a look:
The 5 Markets that Have Been Least Impacted by COVID
5. Wichita, KS
Job Change: -0.4%
Effective Asking Rents: -4.3%
Vacancy Rates Change 1%
Current Vacancy Rate: 9.6%
4. Austin, TX
Job Change: 1.4%
Effective Asking Rents: -6.9%
Vacancy Rate Change: 2%
Current Vacancy Rate: 12.7%
3. Tacoma, WA
Job Change: 1.6%
Effective Asking Rents: -2.8%
Vacancy Rate Change: 1.2%
Current Vacancy Rate: 5.5%
2. Chattanooga, TN
Job Change: 1.7%
Effective Asking Rents: -5.7%
Vacancy Rate Change: 1.7%
Current Vacancy Rate: 7.5%
1. Colorado Springs, CO
Job Change: 4.3%
Effective Asking Rents: -4.7%
Vacancy Rate Change: 1.6%
Current Vacancy Rate: 4.8%
The 5 Markets that Have Been Most Impacted by COVID
5. Lexington, KY
Job Change: -10.9%
Effective Asking Rents: -3.8%
Vacancy Rate Change: 0.7%
Current Vacancy Rate: 5.4%
4. Syracuse, NY
Job Change: -11.2%
Effective Asking Rents: -3.1%
Vacancy Rate Chane: 1.3%
Current Vacancy Rate: 12.1%
3. Fairfield County, CT
Job Change: -11.4%
Effective Asking Rents: -5.1%
Vacancy Rate Change: 1.1%
Current Vacancy Rate: 9.7%
2. Cleveland, OH
Job Change: -12.2%
Effective Asking Rents: -3.8%
Vacancy Rate Change: 2.5%
Current Vacancy Rate: 8.3%
1. Las Vegas, NV
Job Change: -12.3%
Effective Asking Rents: -7.0%
Vacancy Rate Change: 1.7%
Current Vacancy Rate: 10.6%
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About the Author
Ellie is the founder of Blue Lake Capital, a real estate company specialized in multifamily investing throughout the United States. At Blue Lake Capital, Ellie helps investors grow their wealth and achieve double-digit returns by investing alongside her in exclusive multifamily deals they usually don’t have access to.
Ellie is the host of REady2Scale , a podcast that highlights honest, insightful, and thought-provoking discussions on the multiple approaches for successful real estate investing.
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can read more about Blue Lake Capital at www.bluelake-capital.com and learn more about Ellie at www.ellieperlman.com.
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