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Interest Rates Are Rising. Here's Why Employers Should Stay Calm


The commercial real estate job market has shown signs of steadily bouncing back. The Bureau of Labor Statistics reported that throughout April 2022, approximately 428,000 new jobs have been created across various sectors of CRE. 

Despite these strong numbers, many CRE firms may be cautious about hiring, thanks to the current economic climate. On May 5, the Federal Reserve raised interest rates by half a percentage point, in an effort to combat rising inflation and slow down job growth. This hike in interest rates could mean higher costs and potential layoffs for many industries — including CRE. 

Within its May 4 outlook, the National Association of Realtors said that CRE sectors such as industrial and multifamily are expected to continue performing well even during these uncertain economic times. Although the office sector has been experiencing obstacles, as employers work to attract and retain top talent, NAR said there may be some difference in performance depending on the state, with midsized markets faring better.

For the time being, while CRE employers should assess the impact that interest rates could have on their market and company, they should avoid the impulse to make any sudden moves that could affect the company’s long-term success.

Read below for three things to avoid when navigating the impact of rising interest rates.

  1. Don’t Pause Hiring Or Start Firing

While rising interest rates can mean that some CRE companies have to make changes, one of these changes shouldn’t be to rush to put together severance packages or pause hiring right away. Forbes suggests that while companies may be inclined to downsize their workforce or stop hiring in order to save money, they may end up losing out on valuable talent, as well as opportunities for growth.

Before handing out pink slips, CRE firms should look at all other avenues for cutting costs if the need arises. Top talent remains hard to come by in this economy, and finding and keeping the right people should always be a top priority for firms.

  1. Don’t Fully Abandon The Office 

CRE firms that still have office space may be tempted to go 100% remote to cut back on the cost of leasing an office. This, however, may not be the best decision.

While many employees want to continue working from home, many have also expressed interest in maintaining a hybrid schedule, where they come into the office a few times a week. At the same time, other workers have been eagerly anticipating making a full-time return to the office. 

"While teleconferencing has proved useful, it is not nearly as good as having everyone in the same room," two McKinsey senior partners wrote in an op-ed column for Fortune. "In addition, it is difficult — maybe impossible — to build a cohesive corporate culture remotely.”

With all this in mind, despite the interest rate increase, in order to be able to connect with top talent it may not be the time to eliminate the office altogether. 

  1. Don’t Spend Too Much On Luxuries

As employers, and especially small-business owners, take into account their finances in relation to interest rate hikes, CRE employers who need to make some adjustments to their budgets should take a step back and re-evaluate how to avoid spending money where money doesn’t need to be spent.

Black Enterprise recommends cutting back on superfluous purchasing, such as magazine subscriptions, and, if need be, working with a bank that doesn't enact extra fees. Additionally, as a way to engage employees and make them feel like they are part of the company’s decision-making processes, Black Enterprise also suggests taking employees’ input for reducing costs into consideration for how they can reduce their spending.

Contact SelectLeaders for more information or assistance with navigating employment decisions in response to rising interest rates.