Economy / Trends:
The economy continues to underwhelm as we complete the first quarter of 2013. Job growth so far this year in the United States is trending upward, but not at a pace that matches 2012. Although the “fiscal cliff” was averted at the beginning of the year, critical decisions have been postponed until later in 2013. One of the results of the failure to come to a budget agreement is “sequestration,” mandatory across the board budget cuts, which took effect March 1 and is contributing to ongoing economic uncertainty in the private sector.
U.S. employers added just 88,000 jobs in March, less than half of what was expected, following 268,000 jobs added in February. The good news is unemployment has steadily declined since peaking at 10.0% in October of 2009. And while unemployment ticked down to 7.6% in the first quarter, job growth only kept pace because of people leaving the job market. The share of Americans seeking jobs is at its lowest since 1979. In Canada, the picture is even more gloomy. The unemployment rate is 7.2%, up slightly from end of year 2012, with 26,000 jobs lost since the beginning of 2013.
With economic growth continuing slowly, the office and industrial markets continue to improve. First quarter 2013 absorption for both office and industrial property remains at the quarterly pace of last year and availability continues downward. Demand for Class A office space and modern distribution space is strong.
Business Drivers
The United States economy, while growing, is off its 2012 pace while the Canadian economy shed jobs in the first quarter of 2013. Despite the stock market reaching a new record high and a recovering housing market, sequestration and government austerity measures are resulting in slower economic growth. Both retail sales and job growth were weaker than forecast in the first quarter. The Standard & Poor’s/Case Shiller index of housing prices as of January 2013 reports an annual increase of 8.1% for the 20-city composite. Housing construction continues to increase as well following the great recession and housing crash. The housing recovery has bolstered construction jobs and could result in added demand for office space related to mortgage processing and for industrial space related to production and warehousing of construction materials.  Month-to-month employment growth in the United States averaged 183,000 new jobs added in 2012. New jobs in January, February and March of 2013 were 119,000, 236,000 and just 88,000, respectively. The possibility of weaker job growth in 2013 may dampen demand for office and industrial space as the year progresses.