U.S. business activity just hit its strongest pace in more than five years. A recent Costar article reported on the trend, since demand for commercial real estate space tends to follow demand for goods and services.
The Headline Numbers
The S&P Global flash U.S. composite purchasing managers index (PMI) rose to 58.4 in September. That’s the highest reading since July 2021. Any number above 50 signals expansion, so this one is well into growth territory.
Here’s what’s driving it:
- Stronger customer demand is lifting new orders at both manufacturers and service providers.
- Service activity climbed to 58.7, also the highest since 2021.
- Employment grew at its fastest pace in more than four years as companies added staff to keep up.
Hiring Is Picking Up
Businesses aren’t just seeing more demand. They’re hiring to meet it. The service sector’s employment gauge hit its strongest level since 2022. More workers usually means more need for office, industrial and flex space, and that’s a trend we need to watch closely.
Costs Are Rising Too
Of course, not everything in the report is rosy. Input costs, which cover the raw materials, labor, energy and services businesses pay for, rose at the quickest rate since 2022. Companies point to higher fuel prices as a main cause, particularly diesel.
A Note of Caution
S&P Global’s chief business economist, Chris Williamson, said business is clearly booming in both manufacturing and services. He did also warn that growth is coming with supply chain bottlenecks. Companies are also reporting more trouble finding suitable staff.
What It Means for Commercial Real Estate
Strong demand is a green light for tenants thinking about expansion, but tighter supply chains and higher costs can slow projects down. If you’re planning a lease, a build-out or a new development, it’s smart to factor in longer timelines and rising expenses. Growth is good, but it rarely comes without a few speed bumps.
