CBRE: ‘Eds & Meds’ Can Cure Market Volatility

The education and health services employment sector–Eds and Meds–has grown every year since 1940 and can soften commercial real estate market volatility, reported CBRE, Los Angeles.

CBRE reported “a convincing relationship between a metro’s concentration of Eds and Meds and its average multifamily and retail rents,”said CBRE Research and Analysis Director Ian Anderson said in a special report, The Eds and Meds Cure for Market Volatility.

Anderson noted that no employment sector grew as quickly–500 percent–or added as many jobs–nearly 19 million–over the past 50 years. “Perhaps more impressively, the sector’s national employment has never declined on an annual basis, going back as far as 1940,” he said. “Even in a tech hotspot like the San Francisco-Oakland metropolitan area, Eds and Meds has created nearly a third of the new jobs in the past 25 years.”

Anderson said multifamily and retail benefit the most from a strong Eds and Meds presence because of the relatively broad demand from education and medical workers for apartments and consumer goods. “In addition to being a growing source of demand for these real estate sectors, our research has discovered a more notable contribution: by providing a consistent source of employment growth across business cycles, Eds and Meds lowers [rent and vacancy] volatility ” he said. “More precisely, a metro economy with a higher concentration of Eds and Meds is buffered from severe overall employment fluctuations, ultimately minimizing their impact on its multifamily and retail markets.”

The education and health services sector provides a “countercyclical” source of employment growth regardless of the metro, Anderson said: “The industry’s secular growth has been a source of stability and growth nationwide.”

Lenders, owners and investors can take advantage of the Eds and Meds sector’s growth by focusing on certain cities, Anderson said. He noted that Philadelphia, Boston, Pittsburgh, Pa., New York, Baltimore and St. Louis contain many of the country’s leading hospitals and universities, “and the sector holds significant influence over their local economies.”

At the other end of the spectrum, medical and educational institutions in Houston, Denver, Orlando, Fla. and Dallas/Fort Worth generally have less influence than other local growth drivers, Anderson noted.