Immigration Squeeze Forces CRE To Underwrite Jobless Economic Growth

Article originally posted on Globe St. on January 29, 2026

The U.S. economy is still growing, but for commercial real estate investors, the more important story may be where growth is not showing up: payrolls. In a recent Marcus & Millichap webinar on the 2026 outlook, Moody’s Analytics Chief Economist Mark Zandi described a market in which restrictive immigration policy has slowed labor force growth so sharply that job creation has “come virtually to a standstill,” even as GDP expands at a solid clip.

That divergence, he suggested, is forcing investors to rethink how they underwrite space demand across multifamily, industrial and office in a cycle defined less by recession risk than by a chronic shortage of workers.

A labor market hit “hard” by immigration policy

Zandi traced the break in the labor data back to “Liberation Day,” when the administration announced a sweeping package of reciprocal tariffs that contributed to a sharp downshift in hiring. Average monthly job growth, which had been running at roughly 175,000 jobs in late 2024, slid toward zero by the end of 2025 and revisions may ultimately show outright job losses.

“The only industry that’s adding meaningfully to jobs right now is the healthcare sector,” he said.

Immigration policy, in his view, is a central driver of that slowdown.

“The highly restrictive immigration policy is really weighing on labor force growth, which has slowed quite dramatically,” Zandi told Marcus & Millichap President and CEO Hessam Nadji. “It’s impossible for the job market to really pick up to any significant degree because of the restrictions on the labor force.”

For investors, the message is that the next phase of the cycle may resemble a capacity‑constrained expansion rather than a typical downturn. Output can keep rising on the back of artificial intelligence and fiscal stimulus, but if firms cannot find workers—or are substituting technology for labor—traditional rules of thumb that tie absorption to headline GDP will be less reliable.

Multifamily: demand without payroll growth

Multifamily is where this disconnect may surface first. Nadji pointed to a 72 percent drop from peak in multifamily starts and a more than 50 percent decline in units under construction, a contraction concentrated in about 10 high‑growth markets that had carried much of the recent construction cycle.

At the same time, only 28 percent of Americans can qualify for a typical first‑time home purchase, and the gap between average rents and the mortgage payment on a median‑priced home is at a record high.

Those data points suggest a persistent renter base even if job growth remains muted, a view echoed by National Multifamily Housing Council President Sharon Géno. Géno told the audience that she watches absorption more closely than almost any other metric because it captures both demand strength and the market’s ability to digest new supply.

Despite heavy deliveries in markets such as Austin, Phoenix and Nashville, she said, “we’re still seeing that the absorption rates remain pretty much at historic norms,” a sign that renters are still forming households and leasing units even in the face of slower hiring.

If immigration caps limit the number of new workers, however, the composition of demand may change. Household formation could tilt toward smaller, higher‑income cohorts able to sustain rent levels even without broad‑based job gains, while lower‑income renters bear the brunt of any softening.

Underwriting assumptions that lean on market‑wide payroll growth may need to give way to more granular analysis of which industries and wage bands are still expanding within a metro and how immigration policy affects those segments. Stress‑testing deals for “GDP without jobs” in apartments means modeling rent growth and occupancy under scenarios in which absorption holds up due to supply shortages and affordability constraints, rather than because local employers are hiring aggressively.

Industrial: supply hangover meets constrained labor

The industrial sector is wrestling with a different version of the same problem. Post‑pandemic, developers poured record amounts of new space into the pipeline, only to see demand fall behind and vacancy rates climb to their highest levels in years. Nadji described a market where the “pain is really concentrated” in larger assets that absorbed most of the new construction, while smaller and mid‑sized facilities owned by private investors have seen little overbuilding and continue to post low vacancies.

NAIOP President and CEO Marc Selvitelli noted that the laws of supply and demand are working, as new projects under construction have fallen back toward pre‑e‑commerce‑boom levels and he expects the sector to move gradually toward equilibrium.

For underwriting, that means treating labor availability as a primary constraint alongside transportation access and utility capacity. Investors evaluating big‑box industrial in secondary markets may need to cut back absorption assumptions or lengthen lease‑up timelines where the local labor pool is already tight and population growth is slowing.

In contrast, infill and smaller‑bay product in metros that continue to attract workers, often coastal or Sun Belt markets with diversified economies, may hold up even in a zero‑job‑growth national environment because they capture migration and repositioning rather than net new employment.

Office: positive absorption in a no‑growth world

Office demand has been the most sensitive to shifts in white‑collar employment, yet the webinar painted a more nuanced picture than the “doom loop” narrative suggests. Nadji highlighted early signs of recovery in office vacancies after years of pandemic‑driven demand shock, underpinned by rising daily office visits as more companies insist on in‑person work. He also underscored the wide gap between older urban product, with vacancies around 27 percent and newer suburban assets, which are closer to 10.5 percent.

Selvitelli reported that NAIOP’s latest office demand forecast shows positive net absorption across all four major U.S. census regions for the first time in several years, even with a soft job market. He argued that companies are not necessarily using less space; they are using it differently, with a premium on amenities and higher‑quality buildings. Zandi, for his part, suggested that artificial intelligence may be holding back hiring, particularly among larger firms that are still assessing how new technology will affect their labor needs.

Together, those comments point to an office market where space demand can stabilize without a robust rebound in white‑collar employment, but only for assets that meet evolving user expectations.

Underwriting in this environment may require separating structural obsolescence from cyclical weakness. Class A and trophy space in amenity‑rich locations could see modest positive absorption even if national payroll growth remains flat, while older commodity buildings face a prolonged period of high vacancy regardless of macro conditions.

Investors stress‑testing office deals for “GDP without jobs” will need to model scenarios where tenant churn and space redesign, rather than net new headcount, drive leasing volumes and capital expenditures.

Stress‑testing for a cycle defined by scarcity

Across sectors, the common thread is that labor—constrained by immigration policy and potentially reshaped by AI—has become the binding constraint on growth.

Zandi still expects the economy to expand between roughly 2.5 and 3 percent in 2026, with unemployment hovering between 4.5 and 5 percent. But he believes the risks are skewed to the downside, particularly if productivity gains from AI begin to displace more workers or if policy choices further restrict labor supply.

For commercial real estate, that outlook argues for underwriting that gives less weight to aggregate GDP and more to local labor dynamics, immigration exposure and sector‑specific hiring trends. Deals that pencil only under robust job growth assumptions may prove vulnerable in a market where output rises, but payrolls do not.

Conversely, assets anchored in metros and niches that can thrive with constrained labor—because of severe housing shortages, strong migration inflows or users less sensitive to headcount—may outperform in a “GDP without jobs” cycle, according to Zandi.

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