The commercial real estate development industry grew at the strongest pace since the economic recovery began in 2011, according to an annual report on the state of the industry recently released by the NAIOP Research Foundation.
The report, titled “The Economic Impacts of Commercial Real Estate,” determined that the economic impact realized by the development process rose 24% over the previous year, the largest gain since the market began to recover in 2011. Direct expenditures for 2013 totaled $124 billion, up from $100 billion the year before, and resulted in several economic contributions to the U.S. economy:
• Total contribution to U.S. GDP reached $376.35 billion, up from $303.36 billion in 2012.
• Personal earnings (or wages and salaries paid) totaled $120.02 billion, up from $96.75 billion in 2012.
• Jobs supported (a measure of both new and existing jobs) reached 2.81 million in 2013, up from 2.27 million the year before.
The report also says that the outlook for the rest of 2014 and into 2015 is that the numbers will continue to rise, with year-over-year growth expected in the range of 8% - 15%.
Commercial real estate development has a ripple effect in the economy, providing wages and jobs that quickly roll over into increased consumer spending.
“Commercial development’s economic impact is tremendous; simply put, a healthy development industry is critical to a prosperous U.S. economy,” said Thomas J. Bisacquino, NAIOP president and CEO. “As the uneven pace of the nation’s economic recovery continues, the industry seeks public policy certainty that bolsters investors’ and developers’ confidence. Despite this lack of assurance, we see positive indicators of a rebounding industry but believe the industry could be more robust.”
The industrial, warehousing, office and retail sectors have shown strong gains:
• Industrial development posted a year-over-year gain of 48.5% due mainly to several groundbreakings of energy-processing facilities.
• Warehouse construction registered a third strong year of increased expenditures in 2013, gaining 38.1% in 2013. That is on top of 2012 growth of 28.4% and 2011 growth of 17.8%, showing a sustained increase in demand for warehouse space.
• Office construction expenditures rose for a second year in 2013, up 23.3% from 2012.
• Retail construction expenditures rose modestly for a third year in 2013, up 4.8% from 2012.
Through increased energy efficiency and advanced technology, building owners have cut the average per-sq-ft cost of operating building space in the U.S. by 14 cents, from $3.20 per sq ft to $3.06 per sq ft. Still, maintaining and operating the existing 43.9-billion sq ft of commercial real estate space resulted in $134.3 billion of direct expenditures and in the following economic contributions to the U.S economy:
• Total contribution to GDP in 2013 $370.9 billion.
• Personal earnings (wages and salaries) totaled $116.8 billion.
• Jobs supported, 2.9 million.
The report includes detailed data on commercial real estate development activity in all 50 states and also ranks the top states according to office, industrial, warehouse and retail categories.
The report is authored by Dr. Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University, and funded by the NAIOP Research Foundation.