Colliers Capital Markets recently spoke to Bret Swango, CFA, Senior Vice President | Workforce Analytics & Location Strategy, about the migration of labor and how it affects real estate investors. Here are the takeaways.
Colliers Capital Markets (CCM): The labor market today is as competitive as in any time we've seen. How are location analytics helping clients find their employees?
Bret Swango (BS): The most critical element of any business is its people, having best-in-class information about supply and demand for the best, most diverse, affordable talent has become increasingly critical. The structural makeup and non-homogenous nature of real estate has made it among the laggards in transforming into a data-driven industry, as many investment decisions are still predominantly driven by hunches and headlines. COVID has changed the world in so many ways that the need for data-driven evidence for key business decisions has never been higher.
CCM: Where are you seeing some of the largest gaps between demand and availability for employees?
BS: It largely follows broader macroeconomic drivers. In general, over the last 18 months there has been a bit of a barbell effect, with strong demand for STEM talent pools as well as for lower-wage blue-collar talent. Increasing demand for digital transformation on the tech side (the need for remote work infrastructure, the shift in consumer spending habits, etc.) and soaring funding for life science sent demand for top talent to all-time highs. Meanwhile, accelerating e-commerce growth increased competition for lower-wage hourly warehousing workers to record levels.
CCM: Investors are heavily favoring the Sun Belt. What key trends are you seeing in the labor force?
BS: We are refreshing the data on our talent migration study performed last year. That analysis showed markets like Tampa, Austin, Phoenix, and Charlotte as the big winners of the COVID migration. They are also among the top markets for multifamily rental growth. Our analysis centered around factors like propensity of the labor pool to work remotely (can they leave their current city), size of the remote workforce (how many who can work remotely have chosen this city), quality of life (weather), and cost of living (taxes). Unsurprisingly, markets with high quality of life and low cost of living did disproportionately well. The market (even for human migration) is efficient. Better information through social media and the Internet are exposing the value proposition of the Sun Belt.
"We are refreshing the data on our client migration study performed last year. That analysis showed markets like Tampa, Austin, Phoenix, and Charlotte as the big winners of the COVID migration."
CCM: What’s your view on the permanency of remote work/flexible schedules?
BS: Technology inherently enables fewer people to generate a greater percentage of value in the world. Thus the best people, with the scarcest, most valuable skill sets (more demand than supply) in fields like IT security, data science, cloud computing infrastructure, etc., will continue to set the market and operate in their preferred environment. The more commoditized your skill set is, the less bargaining power you have about where you work.
This comes down to fundamental supply-demand dynamics. Right now there are still nearly two job openings for every unemployed individual, so the labor market has, for the most part, historically unprecedented leverage. However, this does appear to be changing: in just the past 60 days as many tech layoffs have been announced as in the prior 15 months (according to layoffs.fyi), and Google is the only one of the acclaimed “FAANG” stocks that hasn't announced some type of hiring slowdown or layoffs. About blue-collar talent, Amazon says it plans to slow its growth on its distribution center side and will sublease a number of facilities, potentially welcome relief to competitors for warehouse talent. Thus, the pendulum is starting to swing back in favor of the employer. Not coincidentally, Elon Musk publicly announced a mandated return to the office and within 48 hours, a 10% headcount reduction.
CCM: How can a focus on location strategy help investors make decisions?
BS: Tenants are the predominant value creation mechanism in commercial real estate, thus best-in-class analytics regarding both the current and emerging factors most critical to tenants' location selection decisions are core to generating alpha on behalf of investors. These variables and their weights will certainly shift over time and are doing so increasingly faster. Factors such as carbon footprint and diversity are now core to an occupier's decision process whereas 5-10 years ago, they were more of an afterthought.
"Tenants are the predominant value creation mechanism in commercial real estate, thus best-in-class analytics regarding both the current and emerging factors most critical to tenants' location selection decisions are core to generating alpha on behalf of investors."