With trade tensions escalating and interest rates in the national and Philadelphia commercial real estate market on an upward path, economists are increasingly warning the U.S. economy is in danger of slipping into recession in 2020.
While risks of an eventual national economic slowdown in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – are real and should not be ignored, Philadelphia-focused real estate investors can take comfort the region’s economic indicators are flashing positive signs for 2019 as the Philadelphia-Camden-Wilmington metropolitan area’s job gains have strengthened in recent months to a rate of 1.4 percent year-over-year.
This Co-Star Research report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
The industries powering Philadelphia’s recent job gains are:
Healthcare: In University City, Penn Medicine is now wrapping up construction on the first phase of its 540,000-sf Center for Healthcare Technology. Meanwhile, work continues at the healthcare giant’s largest capital project ever, the 1.5 million-sf Pavilion Hospital, which is expected to be completed in 2021. AmeriHealth Caritas, AmerisourceBergen and Sparks Therapeutics have all recently announced major Philadelphia-area expansion plans.
Information Technology: Philadelphia-based Comcast is in the process of hiring roughly 1,500 new employees as it staffs its recently completed Comcast Technology Center.
Distribution: Retailers and e-commerce firms have been on a tear building new distribution facilities in the region to expedite delivery times for their East Coast customers. Just weeks ago, Amazon completed a major distribution center in Burlington New Jersey expected to employ 600 people, one of five massive distribution centers Amazon has opened in the metropolitan area since 2013.
Many of Philadelphia’s largest publicly traded companies are flush with cash following the passage of the Tax Cuts and Jobs Act of 2017, which sliced the U.S. corporate tax rate almost in half. Over the most recent four quarters of business among some of the leading national and Philadelphia commercial real estate properties, top local employers – including AmerisourceBergen, Aramark, Comcast, and FMC – reported all-time highs in net operating incomes that more than doubled what had been collected during the preceding four quarters.
While the recent tax cuts affecting U.S. and Philadelphia commercial real estate listings are expected to add at least $1.9 trillion to the federal debt by 2028, according to the Congressional Budget Office, they clearly have boosted companies’ willingness to expand payrolls.
According to data from the world’s third-largest staffing firm, Manpower, the percentage of companies in the Philadelphia-Camden-Wilmington metropolitan area planning to increase staffing levels is at the highest levels recorded during this economic expansion. Meanwhile, the percentage of firms in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – planning to reduce their staff is near rock bottom.
Philadelphia’s employment growth could still decelerate in the quarters ahead despite local companies’ aggressive hiring plans. With the unemployment rate among national and Philadelphia commercial real estate listings now well below 5 percent, employers will likely find it increasingly difficult to fill many open positions.
On the spectrum of economic challenges, this is one of the less-threatening problems to face, in part because a tight labor market also supports above-average wage growth. Still, the dwindling supply of available workers was likely a driving force behind the brief slowdown in job growth that took hold here in 2017.
The stage is set for total employment to continue rising in Philadelphia through 2019. The question is how strong and how sustainable these job gains will be.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
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