Job growth is no longer enough to explain CRE demand

Ryan Severino, BGO's chief economist and head of U.S. research, argues that job growth remains an important indicator of commercial real estate demand, but it is a less complete one than it used to be. In the latest edition of BGO's The Chief Economist, which IREI covered, he credits productivity, artificial intelligence, automation, and a more capital-intensive style of growth for the widening gap.

Advanced manufacturing and data centers illustrate the point. Both can produce substantial investment and property demand while creating relatively little permanent employment. Office demand, in Severino's telling, increasingly depends on workplace utilization, employee income, and the way business models use space, rather than on raw employment counts.

That divergence has direct consequences for underwriting. A demand forecast built on regional payroll projections risks missing a data-center boom that appears in power contracts and construction pipelines before it shows up in county employment tables. The same forecast can misread the office recovery, which is tied unevenly to how and where knowledge workers use space, not just to how many of them there are.

Severino does not want to discard the jobs numbers. He wants them read alongside a broader set of indicators. The practical lesson for allocators is to pair payroll data with power demand, capital spending, utilization, and income if they want to see where property demand is actually forming. The economy can keep growing, and the property it needs can keep growing, without a matching surge in people.