“Recession is already here”

Written by Tyler Kastelberg

July 24, 2022

Happy Sunday!

This week’s newsletter is dedicated to discussing the current job market, how it impacts major metros, and the impact on CRE hiring.

Before we get started – if someone forwarded this to you (and you like it), subscribe to this newsletter. I send one weekly email on Sundays with content like this.

The job market is changing, especially in tech

The tech sector is seeing massive layoffs. Layoffs.fyi have recorded more than 56k eliminated positions from 380+ tech companies in 2020.

This is disproportionally impacting major coastal metros, like San Francisco, LA, New York, and Miami.

… and the residential real estate market is starting to feel it

San Francisco in particular is experiencing a massive shift in the residential market. Six months ago, properties sold for considerably above asking at an ever-increasing $/SF. Today, properties are sitting on the market for extended periods of time and sellers are starting to accept price reductions.

In the words of one broker, “the recession has already hit San Francisco.”

The commercial real estate job market is both good and bad …

First the good news – commercial real estate investment and development firms are mostly weathering the current economic storm well. We haven’t seen many layoffs on the buy-side. Additionally, the job market for mid to senior-level employees is still very competitive.

Now the bad news – the mortgage industry is feeling the heat and has laid off thousands of people. Rising rates have slowed refinancings to a trickle, which have been a major part of the business for the past few years.

For the most part, employers are back in the driver’s seat

We saw a shift early this year where there were more CRE jobs than talent. During this period of time, we (Bullpen) saw a steady increase in pay rates for the top freelancers.

Since March, the power has largely* shifted back into the hands of employers. There are multiple great and eager candidates for current job openings.

*I write “largely” because this doesn’t apply to highly skilled and specialized roles. If you’re an expert at marina investing (or something equally as niche), you still have massive pricing power and very little competition for freelance jobs (albeit, there are very few marina jobs available).

What’s next?

I believe the job market is going to get worse before it gets better. While flexible freelance hiring is going to be more appealing than W2 for the foreseeable future, a falling tide sinks all ships. On a positive note for employers, you’re going to be able to hire some great talent with less competition than before.

… just my 2 cents.

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