NAIOP: The impact of commercial real estate on the US economy is growing
The impact of new commercial real estate development and ongoing operations of existing commercial real estate in the United States continues to grow, according to the annual Economic Impacts of Commercial Real Estate, 2022 US Edition, conducted by the NAIOP Research Foundation.
The combined economic contributions of the development of new commercial buildings and the operation of existing commercial buildings in 2021 resulted in direct expenditures of $434 billion and the following impacts on the U.S. economy:
- $1.2 trillion contribution to U.S. Gross Domestic Product (GDP)
- Generated $418.7 billion in personal income
- supported a total of 8.5 million jobs.
Based on the existing stock of commercial buildings – totaling 51 billion square feet at the end of the third quarter of 2021 – direct expenditures for building operations totaled approximately $194.5 billion and contributed $531.5 billion. dollars to GDP. These direct expenditures also generated $187.2 billion in personal income (wages and salaries) and supported 4.2 million jobs.
According to the report, in March and April 2020, the construction sector lost 1.1 million jobs, or 14.6% of employment; in November 2021, it created 1 million jobs, leaving a deficit of 115,000 (1.5%) compared to the pre-recession peak. Apart from the impact on the workforce, the construction industry as a whole has been spared the impact of the pandemic recession. The continued demand for new construction throughout the pandemic has had a positive impact on the economy. Demand for construction inputs – from design services to construction goods and labor – has made the industry a catalyst for economic recovery. The construction industry continues to lead the overall economic recovery in the United States from the pandemic recession. »
Other highlights of the survey include:
- Total construction spending (essential costs) for new office, industrial, warehouse and retail buildings in 2021 totaled $125.6 billion, up $20 billion, or 18.9% , compared to the revised annual total for 2020.
- Spending on office construction has averaged $46 billion over the past five years (2016-2020). Office activity totaled $40.9 billion in 2021, down 5.9% from 2020 and 24.9% from 2019.
- Spending on industrial (manufacturing) construction has averaged $25.6 billion over the past five years (2016-2020). Industrial activity totaled $28.2 billion in 2021, up 81.3% from 2020 ($15.5 billion), but down 16.3% from 2019.
- Warehouse construction spending has averaged $26 billion over the past five years (2016-2020). Warehouse activity jumped 25.9% in 2021 to $43.2 billion. The activity increased by 43% compared to 2019.
- Retail construction spending has averaged $17 billion over the past five years (2016-2020). After declining 26% in 2020, retail trade rebounded in 2021, rising 8.3% to $13.3 billion. Retail activity remained down 19.5% from 2019.
“We are obviously going through a paradigm shift across all industries as a result of the pandemic,” said Thomas J. Bisacquino, president and CEO of NAIOP. “The commercial real estate sector has continued to grow as a result of this change, adding more to GDP, employing more people and generating more personal income. Although we have seen a shift that includes less office building development and more industrial/warehouse development, we expect a return to more normal development patterns as we continue to emerge from the immediate impact of the pandemic on the industry.
Top 10 States by Development Impact in 2021
Here are the top 10 states by development impact (ranked by total output)
(in billions of dollars)
|Supported jobs||Personal gains
(in billions of dollars)
The full report includes detailed data on commercial real estate development activity in all 50 states and the District of Columbia, including direct expenditures; total production; salaries and wages; and jobs supported.
The Economic Impacts of Commercial Real Estate, 2022 US Edition report is authored by Brian Lewandowski, Jacob Dubbert, Michael P. Kercheval, Ph.D., and Richard Wobbekind, Ph.D., of Leeds Commercial Research Division School of Business, University of Colorado Boulder, with data provided by Dodge Data and Analytics.
Since 2008, the NAIOP has conducted this study with the goal of estimating the annual economic contribution of commercial real estate development to the US economy. This study is used by real estate professionals and municipal, state and federal officials and employees, to understand and quantify the key economic benefits of commercial real estate development.