The Labor Department released its monthly Employment Situation report this morning. Flying in the face of the expectations voiced by many economic pundits, the picture painted in the report was “unambiguously good,” as characterized by Kurt Rankin, economist with PNC Financial Services Group in Pittsburgh. The economy created 243,000 jobs in January, bringing the jobless rate to 8.3%, which is the lowest it has been since Feb 2009.
Coincidental to this strong jobs report, we picked up on a story published by Anne Fisher in Fortune this morning. Ms. Fisher takes a look at the strongest metro areas for executives seeking jobs. She utilizes primary research from CareerCast.com, which compiles their ranking based on per capita job availability. The results are not terribly surprising, with a healthy balance of secular CBD markets like Boston and New York and industry-driven markets like San Francisco and Seattle dominating a list that is rounded out with a few interesting regional economies. To wit, economic growth has been healthy, if not notably strong, in our own backyard in the San Francisco Bay Area. At the present, it is virtually impossible to escape the buzz about the forthcoming IPO of social media colossus FaceBook; Apple recently reported another corner of record growth; and the aforementioned FaceBook IPO is just one of several recently completed technology-related IPOs (e.g. Pandora and Tesla) with still more significant private companies (e.g. gaming company Zynga) left in the pre-IPO hopper. On the other hand, it is a little more surprising to find some growth-oriented regional economies that had stalled during the recession, such as Denver and Atlanta, on the list; a healthy job market in these types of economies may be a more positive indicator that the employment landscape is starting to improve at a national level.
We are fond of saying that the public REITs house the U.S.economy. Employment is paramount not just to office occupancy and rents, but also to robust operations for virtually every corner of commercial real estate. A well-employed job base means increased demands for multi-family units to house workers, hotels to host business travelers, and better consumer confidence to drive retail sales and prompt retailers to keep warehouses well-stocked. In support of this belief, when we plotted the RMZ Index against the unemployment rate there was tight (negative) correlation between unemployment rate ane REIT returns.
We also cross-referenced the cities on the list with geographic exposures in our core portfolios and found that the regional economies on the list were heavily represented within our holdings. Utilizing SNL, we aggregated our portfolio holdings and sorted by city. Cities making Fisher’s list for the best markets for job seekers comprised just over 20% of the total square footage owned by the REITs we are invested in. The average position of a city on the Fisher’s top ten list was 26 on the list of cities we have indirect investments in.
Please see below for our analysis of portfolio exposure to the cities highlighted in the story and feel free to contact us with any questions about the results.
The views expressed in this update are as of the date of this blog entry. These views and any portfolio holdings discussed in the update are subject to change at any time based on market or other conditions. The adviser disclaims any duty to update these views, which may not be relied upon as investment advice. In addition, references to specific companies’ securities should not be regarded as investment recommendations or indicative of the Adviser portfolios.