Real Estate Journal — June 23 - July 13, 2017 — 3A
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M id A tlantic
M id A tlantic R eal E state J ournal
By Ian Anderson, CBRE The Eds & Meds cure for market volatility
O
ver the past 50 years, no major U.S. employ- ment sector has grown
Figure 1
Figure 2
as qu i ck l y ( 5 0 0% ) o r added more j o b s ( 1 8 . 8 m i l l i o n — mo r e than one out o f every five) t h a n t h e Education & Health Servic-
Ian Anderson
es industry (as defined by the U.S. Bureau of Labor Statis- tics industry sectors of Educa- tion Services and Health Care and Social Assistance). Figure 1 ranks the 25 larg- est U.S. metropolitan areas (in terms of total employment) by the Eds & Meds sector’s share of total local employ- ment. Philadelphia, Boston and Pittsburgh have been at the top of this ranking for decades, trading the lead in- frequently. The next three— New York, Baltimore and St. Louis—also show markedly higher concentrations. These six metros—the “Big 6”—con- tain many of the nation’s lead- ing hospitals and institutions of higher education, and the sector holds significant influ- ence in their local economies. Multifamily and retail are the major CRE sectors that most directly benefit from an Eds & Meds presence, due to the relatively broad de- mand from education & health services workers for rental apartments and consumer purchases. In addition to being a growing source of demand for these real estate sectors, our research has discovered a more notable contribution: by providing a consistent source of employment growth across business cycles, Eds & Meds lowers volatility in multifamily and retail rents and vacancy. We looked at how our 25 largest employment markets performed over the past two business cycles relative to their concentrations of Eds & Meds. To measure the volatili- ty of a metro’s multifamily and retail market, we calculated its peak-to-trough decline in average rent during the past two recessions (2001 and 2007- 2009), and then the number of quarters it took to re-achieve the peak. We show some of the results in Figure 2, illustrating the relationship between a metro’s Eds & Meds concentration
and the decline in its average multifamily and retail rents during and after the 2007-
2009 recession. A discernible relationship shows that metros continued on page 10A
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