Downtrodden but Resurging U.S. Sunbelt Economies Likely to Surpass National Growth Rates
Jones Lang LaSalle's special report on the U.S. office sector: Sunbelt geographies turning around with increased employment, population and demand in housing and office sectors
CHICAGO, March 15, 2012 /PRNewswire/ -- Recent economic and real estate factors indicate that most of the Sunbelt geographies have already hit their cyclical lows and during the next six to 12 months are likely to surpass national growth rates, according to a special office report issued by Jones Lang LaSalle.
Although nearly all areas of the U.S. were negatively impacted by the recession, some of the hardest hit were the Sunbelt markets of Fort Lauderdale, Jacksonville, Las Vegas, Los Angeles, Miami, Orange County, Orlando, Phoenix, San Diego, Tampa and West Palm Beach.
"The Sunbelt markets witnessed substantial drops in their overall economies in 2007-2009 with relatively no recovery in 2010-2011. However, despite ongoing negative perceptions, most of these markets are undergoing a resurgence and poised for dramatic changes in 2012 and beyond," said John Sikaitis, Senior Vice President of Research at Jones Lang LaSalle. "These economic upswings bring much optimism for future office and employment levels, as well as investor interest for the capital markets."
Sunbelt office recovery indicates future gains to surpass national levels
Currently nearly all Sunbelt markets posted substantial upticks in occupancy, experienced declines in vacancy and moved closer to seeing office rents and concession levels hit bottom. In 2011, occupancy gains in these beaten-down housing economies totaled nearly 6.0 million square feet and provided evidence that, as we move forward in 2012, most of these geographies will start to outpace the national recovery. This resurgence is due to strengthening employment, migration and housing market shifts with absorption rates in the 1.5 percent to 2.0 percent range across most the Sunbelt geographies.
Sunbelt-wide employment gains outperforming national averages of late and picking up speed month by month
Markets such as Jacksonville, Miami, Orange County, San Diego, Tampa and West Palm Beach have surpassed the national average in total non-farm, private and professional and business services (PBS) job growth. Floridian markets have dominated the jobs recovery of late: Jacksonville's 5.9 percent annual increase in PBS jobs is among the largest in the nation, while Tampa's 2.5+ percent annual growth in all measures shows signs of revival and diversification. Miami also surpasses both national expectations, increasing at around 1.9 percent overall annually.
Sunbelt migration trends starting to turn positive
In terms of domestic migration, the majority of Sunbelt cities display a common pattern: a net loss of residents in 2007, shifting to an inflow of residents in 2008 or 2009 and then stable, yet increasing, population growth in 2010 and through 2011. Nearly 75 percent of the Sunbelt markets are now, once again, showing significant positive migration with Florida reporting the largest increase of at least 20 percent. As the hub to Latin America, Miami and Fort Lauderdale are leading the charge due to strong immigration trends from Latin America that drive population, business and economic growth.
Sunbelt's housing crunch on the verge of stabilizing
Since their pre-recession peaks, housing markets within the Sunbelt have experienced drastic reductions in price and sale volume, far greater than any other region of the United States. In most cases, these housing markets have yet to begin recovery. However, as a result of positive office demand growth, employment and migration indicators, there is a strong chance that most of these geographies are hitting their market low and will soon begin to recover, if this has not begun already. Since employment and other indicators point to recovery while housing prices are only beginning to stabilize or in some cases are still decreasing, continued economic, employment and office sector growth will lead to gradual, but steady, gains in the housing sector moving forward.
2007 levels far off but future gains are on the horizon
Vital to the continued improvement of most Sunbelt geographies in 2012 will be consistent gains in employment across multiple sectors with emphasis on diversifying economies. Since job performance has remained either constant or accelerating in these metropolitan areas not only among themselves, but also outpacing national results, it is probable that most Sunbelt markets will recover faster than the U.S. as a whole in 2012 and 2013. They will see rebounds in their housing markets as well, driving even further office demand from the housing-sectors (i.e. homebuilding, mortgage companies, etc.)
Sikaitis added, "Whereas migratory patterns drove the Sunbelt to unprecedented growth in the pre-recession years, those patterns will now be reflective of recent strong office recovery in these markets, being more economically sustainable and diverse than before with the potential to surpass the rest of the country. Even with these positive shifts, most of these geographies are two to three years away from returning to pre-2007 levels; so, while we are upbeat about the recovery for these markets, we remain realistic and guarded in the fact that we are not yet back to 2006 territory and likely will not be until the 2014-2015 timeframe."
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About Jones Lang LaSalle
Jones Lang LaSalle (NYSE: JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company's investment management business, is one of the world's largest and most diverse in real estate with $47.7 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.
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