With nearly four decades of experience in real estate market research, consulting and city planning, Robert Bach heads Newmark Grubb Knight Frank's Research department and is the company's spokesperson on national trends affecting the commercial real estate industry. A member of the Conference of Business Economists and the Counselors of Real Estate, he is widely quoted in the trade and business press, including The Wall Street Journal, New York Times and Bloomberg, and is a frequent speaker at industry events. He focuses on the creation of white papers, articles, client communications and other types of analyses, positioning Newmark Grubb Knight Frank as the knowledge leader in the industry.
Newmark Grubb Knight Frank Market Insights Commentary:
03.04.2016 More Jobs, Less Wages
Reversing the January employment report, job growth surged in February, but wage growth languished. Here are the details
02.26.2016 Northern Exposure
Canadian office vacancy rates since 2010 reflect a strong recovery from the Great Recession, led by the booming energy industry in the Western provinces and the growth of services employment in major cities. More recently, the economy has been hit with the global oil price collapse, aggravated by high break-even costs of $75 to $80 in Alberta’s oil sands. From its low point of 4.7% in the fourth quarter of 2012, the average vacancy rate for Class A and Class B space in Canada’s eight largest downtown office markets rose to 8.3% at year-end 2015—pushed by oil industry layoffs in Calgary and Edmonton and by construction of new space across the nation’s metros.
With more than 75% of companies in the S&P 500 reporting fourth-quarter results, earnings appear headed for a third consecutive quarterly decline, in what would be the first time since the recession. Much of the earnings decline has been driven by energy companies and multinationals grappling with the twin headwinds of weak overseas demand and the strong dollar making their exports less competitive. As a result, businesses have reined in capital spending, which fell sharply by 4.3% in December1. That’s a concern for the economy, because business fixed investment accounts for around 15% of total GDP.
02.12.2016 CRE’s Leading Indicator
Commercial real estate is a lagging indicator of a lagging indicator, meaning that the CRE leasing market lags job creation by several quarters in a normal market, and job creation lags other economic indicators including corporate profits and consumer spending. Generally, this means that the CRE industry is among the last to see a recession coming.
02.05.2016 Fewer Jobs Added, Wages Grow
The January employment report showed pockets of strength and weakness in the economy, with seasonal adjustment issues further muddling the picture.
01.29.2016 The Headwinds
The twin plunges in oil and stock prices that began late in 2015 intensified in January, raising fears of a recession globally and in the U.S.
01.22.2016 U.S. Industrial Market: Record Demand
Absorption of U.S. industrial space broke all records in 2015, as demand from retailers and distributors overcame weakness in exports and manufacturing.
01.15.2016 U.S. Office Market: Still on a Roll
The office market was unfazed by weakness in equities, economic problems in China and falling oil prices in the fourth quarter, racking up solid demand and firming market fundamentals.
01.08.2016 Labor Market Roars
The Dow suffered its worst four-day start to a year on record, China’s economy is struggling, and oil prices are languishing. But the labor market ended 2015 on a high note. Here are the details
12.18.2015 The Fed Strikes
The Federal Reserve finally got out of the starting gate on Wednesday, raising the federal funds rate (the rate charged for overnight loans between banks) for the first time in nearly a decade, by a quarter of a percentage point to a range of 0.25% to 0.50%. This ended an unprecedented seven-year period of near-zero interest rates following the recession and financial crisis of 2008-2009.
12.11.2015 Retail Outlook
The holiday shopping season, generally considered the months of November and December, is off to a solid start this year. November retail sales, released this morning by the Census Bureau, rose a tepid 1.4% from a year ago, restrained by falling gas prices. But core sales, excluding autos and gas, rose a more robust 3.6%, in line with forecasts by industry sources calling for an increase of 3.0% to 4.0%. The following are some key trends driving the industry through the 2015 holiday season and beyond
12.04.2015 Job Growth Hits Target; Rates Set to Rise
The November employment report released Friday morning by the Bureau of Labor Statistics met expectations, clearing the path for the Federal Reserve to raise interest rates for the first time since 2006. Here are the details
11.20.2015 A Lot to Be Thankful For
The price of a Thanksgiving dinner for 10 increased by a meager 1.4% this holiday season compared with last year, according to the American Farm Bureau Federation. Farmers have done better with their real estate value—up 2.4% from 2014, as reported by the U.S. Department of Agriculture
11.13.2015 The Great Divide
Manufacturers are struggling as the strong dollar and tepid growth in Europe, China and emerging markets clamp down on exports. The Institute for Supply Management’s manufacturing index slid to 50.1 in October, barely above the break-even level of 50 and down from 57.9 a year ago. The details of the report were mixed, with production and new orders, a leading indicator of future production, both slightly higher at 52.9, while new export orders, inventories and employment demand were all below 50, indicating contraction. The surplus of inventories portends a decline in production, as companies work down excess inventories. Total private inventories subtracted 1.4 percentage points from GDP last quarter and will likely be a drag on fourth-quarter GDP
11.06.2015 Labor Market Takes Off
The October employment report released Friday morning by the Bureau of Labor Statistics blew past expectations, confirming that the disappointing performance in August and September wasn’t the start of a trend. Here are the details....
10.30.2015 Industrial Sticker Shock
At this week’s NGKF Industrial Strength conference, a panel of landlords and investors described how tenants are experiencing sticker shock as they renew leases signed several years ago. Across the U.S., the average asking rent for industrial and flex space ended the third quarter at $5.72/SF triple net, up from the post-recession trough of $5.05 in 2011-Q4 – a gain of 13.3% total and 0.8% compounded per quarter over this period.
10.23.2015 The Next Recession
An economist once said words to this effect: “No economic expansion has ever died peacefully in its bed from old age. Every one of them has been murdered by the Federal Reserve.”
That’s an exaggeration, but it does highlight the fact that, until recently, most expansions ended when the Fed “took away the punch bowl,” i.e., raised interest rates, to keep inflation in check. However, the past three recessions were triggered—or at least made worse—by poor investment decisions that caused a financial bubble to burst with dire consequences for the broader economy.
10.16.2015 U.S. Industrial Market: Absorption Eases
Absorption of industrial space in the U.S. eased in the third quarter of 2015, after hitting its second-highest level on record in the second quarter.
10.09.2015 U.S. Office Market: Another Robust Quarter
The office market expansion cycle has been remarkably consistent, shrugging off stock market volatility, economic turmoil in China and emerging markets, weak demand for energy and commodities, and glacially slow growth in the euro zone. The market turned in another solid performance in the third quarter
10.02.2015 Soft Patch
The September employment report released this morning by the Bureau of Labor Statistics fell far short of expectations and suggests the labor market has decelerated in the last two months. Here are the details:
09.25.2015 Metro Job Growth: Who’s Ahead?
The NGKF Research Department tracks metro job growth on a monthly basis for areas with populations greater than 1.0 million and selected smaller areas using the Bureau of Labor Statistics’ latest data. But the last time this column discussed metro job growth was six months ago. What has changed since last spring?
09.18.2015 Friday Morning Quarterbacking
After more than nine years without a rate increase, the Federal Reserve has decided it won’t hurt to wait at least another month, maybe longer, before it finally pulls the trigger. The Fed’s decision yesterday to hang fire was spurred by the latest economic turmoil in China, recent volatility in U.S. and global financial markets and persistently low inflation. The central bank has a dual mandate to pursue maximum employment and stable prices in the U.S., not the rest of the world.
Apartments clearly are farther along in the current expansion cycle than other property types, with the rapid escalation in construction activity raising yellow flags in some areas. Yet there is evidence to support the view that, in the aggregate, supply is barely keeping pace with demand.
09.04.2015 Good Enough?
This morning’s employment report from the Bureau of Labor Statistics is the last one before the Federal Open Market Committee meets in two weeks to decide whether to raise short-term interest rates. Was the report good enough to embolden the Fed to make its long-anticipated move this month, or will the Fed further delay its first rate increase since the Great Recession?
08.28.2015 Another Recession? Not Yet
All three major stock market indices moved into correction territory over the past week, meaning that they slipped by 10% or more from their previous highs. This marked the 22nd correction in the S&P 500 since World War II. The markets rebounded at the end of the week, but the correction was still a shock to investors, for several reasons..
08.21.2015 Still Holding On
Oil prices have endured another sharp move to the downside, with the spot price for a barrel of West Texas Intermediate (WTI) crude ending Thursday at $41.14, down 2.6% from a week ago and 57.2% from a year ago. In its Short-Term Energy Outlook report published in January, the U.S. Energy Information Administration (EIA) forecast a December 2015 price of $67 and a December 2016 price of $72. In its most recent report, published in August, the EIA forecasts December prices of $47 this year and $57 next year.
08.14.2015 The Demographic Imperative
The homeownership rate in the U.S. declined to 63.5% in the second quarter, down from 64.7% a year ago and the lowest level since the Census Bureau began seasonally adjusting the data in 1980. With a household count of 117.3 million, the year-over-year decline of 1.2 percentage points in the homeownership rate created approximately 1.4 million new renter households.....
08.07.2015 Solid, Not Spectacular
The July employment report from the Bureau of Labor Statistics offered no surprises, on the upside or the downside. It was a status quo kind of report......
07.31.2015 How Much Longer
Commercial real estate is enjoying an epic run with prices approaching and in some cases surpassing pre-recession highs, new supply coming online at a controlled pace, and rental rates growing at about twice the rate of core inflation (which excludes food and energy). With the economic recovery having just begun its seventh year, some in the industry are wondering how much longer this can last......
Absorption of industrial space in the U.S. hit its second-highest level on record last quarter, pushing vacancy to its lowest level since 2001.....
As expected, the economy and the office market moved past their first-quarter malaise—brought on by the harsh winter, the negative effects of the strong dollar and the decline in shale oil exploration and investment. Economic growth resumed, and the office market returned to its 2014 growth trajectory featuring strong metrics across the board......
Top-line job growth in June matched analyst expectations, but wage growth disappointed. The Bureau of Labor Statistics released its monthly report a day earlier than usual due to the July 4th holiday......
Next Thursday, the Bureau of Labor Statistics releases its monthly report on the labor market, which will update job growth, unemployment and wage data for the month of June. In anticipation of the widely followed report, the adjacent graphic provides a quick review of how the labor market impacts commercial real estate, based on the change in employment for the 12 months ending in May, for the major sectors of the economy.
06.19.2015 Consumers Come Off the Sidelines
As noted in last week’s Friday Market Insight, the stars are beginning to align for consumer spending, an indicator that accounts for more than two-thirds of total economic output as measured by GDP.....
06.12.2015 Wages Starting to Rise
Wages are finally starting to accelerate after more than five years of lackluster growth. With consumer spending accounting for more than two-thirds of total GDP, this is welcome news for the economy. As incomes rise, the increased demand for goods and services will filter through to housing, business capital spending and other sectors of the economy.
06.05.2015 Job Growth Back on Track
Job growth accelerated in May, helping balance a slew of recent disappointing economic reports such as consumer spending, manufacturing, exports and business capital spending. Here are the details of this morning’s report from the Bureau of Labor Statistics.....
05.29.2015 Holding On
Five big energy producing states—Colorado, Louisiana, North Dakota, Oklahoma and Texas —saw nonfarm payroll employment rebound in April despite mounting job losses in the mining sector, which includes oil and gas production. The five-state region added 13,600 payroll jobs last month, overcoming the loss of 13,200 mining jobs and partially offsetting the 48,600....
05.26.2015 It's All About Supply - Part II
A recent Friday Market Insight covered the slow ramp-up in the supply of space thus far in the current expansion cycle. To recap......
05.15.2015 Population Picks and Pans
Population growth is a key driver of demand for commercial real estate. Although job growth is routinely cited as the most important economic driver of demand, there would be no job growth without population growth.....
05.08.2015 April Comeback
Job growth bounced back in April from the weather-induced dip in March, but there are signs of lingering weakness related to the struggling energy and manufacturing sectors. Here are the details of this morning’s report from the Bureau of Labor Statistics (BLS).....
05.01.2015 Three Reasons Why GDP Will Rebound
The advance reading of first-quarter gross domestic product, released earlier this week, was disappointing; the nation’s total output of goods and services, adjusted for inflation and seasonality, grew by just 0.2% on an annualized basis.....
04.24.2015 It's All About Supply
Commercial real estate has always been a highly cyclical industry, with steeper peaks and valleys than the overall economy. One of the four phases of the real estate cycle, taught in universities and professional training classes, is called “overbuilding” or “saturation,” an acknowledgement that the industry is prone to periods of severe imbalances between supply and demand......
04.17.2015 The Office Market Takes a Breather
The office market showed signs of deceleration in the first quarter of 2015, as net absorption sank to its lowest level in four years and the vacancy rate remained stable, ending a string of 15 consecutive quarterly declines.....
04.10.2015 Metro Job Growth: Where Are We Now?
Early each year, the Bureau of Labor Statistics “benchmarks” monthly employment data for the prior year, revising its sample-based estimates to match unemployment insurance tax reports that employers file with state agencies....
04.03.2015 The Pause That Refreshes
Employers tapped on the brakes last month, ending a string of 12 consecutive months of job gains above the 200,000 threshold. Here are the details of this morning’s report from the Bureau of Labor Statistics....
03.27.2015 U.S. Industrial Market First Look: 1Q15
The U.S. industrial market continued its historic run in the first quarter, shaking off weakness in the manufacturing sector....
03.20.2015 Where Talent Is Affordable
The labor market is tightening, and businesses are competing vigorously to recruit talented employees. The unemployment rate has fallen from 10.0% in October 2009 to 5.5% in February 2015, not far from its prior trough of 4.4% in May 2007, before the recession....
03.13.2015 The Gradual Incline
Construction activity is ramping up across all product types; however, with the exception of apartments, the rate of increase has been well below the prior expansion cycle....
03.06.2015 Job Growth Escalates, Wage Growth Retreats
The labor market continued to generate jobs at a rapid pace last month, pushing the unemployment rate to its lowest level since May 2008, according to this morning’s report from the Bureau of Labor Statistics. But wage growth, which had spiked in January, slipped back into its post-recession rut....
02.27.2015 Controlled Deflation
The consumer price index plunged 0.7% in January, its sharpest one-month decline since the thick of the financial crisis at the end of 2008. January’s decline was triggered by the halving of oil prices since mid-December....
02.20.2015 Through Massive Change, Health Care Industry Continues to Grow: The health care industry is arguably going through more change and restructuring than any other economic sector. Consider the following....
Retail Market-Vacancy falls from 10.2% to 9.8% by year-end 2015 for neighborhood and community centers; average asking rent up 2 to 3%....
02.06.2015 Unambiguously Strong Jobs Report
Job growth last month beat analysts’ forecasts, which was unexpected given that analysts had overestimated the January number in nine of the past 10 years due to the volatility of holiday hiring trends....
Office Market-Vacancy falls from 14.3% to 13.8% by year-end 2015; average asking rent up 4 to 5%....
On the heels of the 50-plus percent decline in oil prices since the fall, inflation is receding in the U.S. and across most of the globe. In the U.S., the Bureau of Labor Statistics’ Consumer Price Index for All Urban Consumers (CPI-U) fell 0.4%....
01.16.2015 Oil Price Outlook
The spot price of a gallon of West Texas Intermediate crude oil (WTI) ended the day yesterday at $46.25, a decline of 56% from its June 2014 peak of $105.79 per barrel. Declines of a similar magnitude have occurred twice in recent history....
01.09.2015 Wage Growth Recedes
Job growth last month came in above expectations, but that wasn’t the biggest piece of news in this morning’s December employment report from the Labor Department. Wage growth, which increased sharply in November—raising expectations that wages and incomes were finally on the rise....