The one-sided nature of the K-shaped recovery continues to affect commercial real estate in different ways.
The focus is on the dichotomy between higher-paid workers who survive the recession and low-paid workers who have problems.
"People with less education were more than twice as likely to be unemployed as college graduates," said Marcus & Millichap in a new research report. "People without a bachelor's degree were more likely to be employed in low-skilled roles that were disproportionately affected by home assignments."
Amazon is a bright spot as it hires employees to meet growing demand for deliveries. However, the aviation industry was allowed to begin layoffs on October 1, which M&M said could affect more than 30,000 employees. Disney will lay off a similar number of workers.
“These and other job losses, months after the health crisis began, show how many companies can get worse before they get better. Instead of a coherent growth trend, the economy is taking different paths and supporting a K-shaped recovery, ”the M&M report said.
According to M&M, the disparity in unemployment rates between low and high income workers has a “remarkable impact” on commercial real estate. This trend affects all aspects of commercial real estate, from apartment buildings to industrial properties supported by people who can pay for online products to retail stores.
For example, JLL's Ryan Severino pointed this out in a report earlier this summer that retailers and retail centers – especially those targeting less affluent households –can lag behind other economic sectors in the K-shaped recovery. As the demand for home ownership increases, lower-income shared apartments may also face problems.
A similar dynamic can be seen in the housing sector. Historically, according to M&M, the performance of class C apartments corresponds to the unemployment rate. This relationship did not materialize during COVID. M&M speculates that expanded unemployment benefits and eviction moratoriums are the reasons for this divergence from past performance. But now unemployment benefits are over. Without additional incentives to support low-wage workers, Class C housing could experience significant disruption.
The concentration of job loss in sectors that often employ low-income workers also plays a role. Namely the Accommodation and catering sector More than 3.2 million jobs were lost between February and August, according to research by the National Multifamily Housing Council. The sector's employment level declined 22.7% from February to August, the second largest national decline after arts, entertainment and leisure, declining 35.2%.
"Residents of apartments made up 18% of all employees in the area of accommodation and meals in 2018," according to the NMHC. "This sector had the largest proportion of its workforce in apartments."