NAIOP: Commercial real estate impact on US economy growing

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The impact of new commercial real estate development and the ongoing operation of existing commercial real estate in the United States continues to grow, according to the annual research study Economic Impacts of Commercial Real Estate, 2022 US Edition, conducted by the NAIOP Research Foundation.

The combined economic contributions of developing new commercial buildings and operating existing commercial buildings in 2021 resulted in $434 billion in direct expenditures and the following impact on the US economy:

  • $1.2 trillion contribution to US gross domestic product (GDP)
  • Generated $418.7 billion in personal earnings
  • Supported a total of 8.5 million jobs.

Based on the existing commercial building stock — totaling 51 billion square feet at the end of Q3 2021 — direct expenditure on construction operations was an estimated $194.5 billion and contributed $531.5 billion of GDP. This direct spending also generated $187.2 billion in personal income (wages and salaries) and supported 4.2 million jobs.

According to the report, the construction industry lost 1.1 million jobs, or 14.6% of employment, in March and April 2020; By November 2021, 1 million jobs had been restored, leaving a deficit of 115,000 (1.5%) from the pre-recession peak. Aside from the impact on the labor market, the construction industry as a whole was spared the impact of the pandemic recession. Continued demand for new homes during the pandemic has had a positive impact on the economy. Demand for construction services – from engineering services to building products and labor – meant the industry was a catalyst for economic recovery. The construction industry continues to lead the overall recovery of the US economy from the pandemic recession.”

Among other survey highlights:

  • Total construction spending (hard costs) for new office, industrial, warehouse and retail buildings in 2021 totaled $125.6 billion, an increase of $20 billion or 18.9% from revised annual total for 2020.
  • Office construction spending has averaged $46 billion over the past five years (2016-2020). Office work totaled $40.9 billion in 2021, down 5.9% from 2020 and down 24.9% from 2019.
  • Over the past five years (2016-2020), industrial (manufacturing) construction spending has averaged $25.6 billion. Industrial activity totaled $28.2 billion in 2021, up 81.3% from 2020 ($15.5 billion), but down 16.3% from 2019.
  • Warehouse construction costs have averaged $26 billion over the past five years (2016-2020). Warehousing activity increased 25.9% in 2021 to a total of $43.2 billion. Activity increased by 43% over 2019.
  • Retail construction spending has averaged $17 billion over the past five years (2016-2020). After a 26% decline in 2020, retail trade rebounded in 2021, rising 8.3% to $13.3 billion. Retail activity lagged 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 industry has continued to grow because of this change, contributing more to GDP, employing more people and generating more personal income. While we have seen a shift that is less office building development and more industrial/warehouse development, we expect a return to more normal development patterns as we continue to recover from the immediate impact of the pandemic on the industry.”

Top 10 countries by development impact in 2021

The following are the top 10 countries by development impact (ranked by overall performance)

Status overall performance
(in billion dollars)
jobs supported Personal Income
(in billion dollars)
Texas $75.89 526,181 $28.63
Arizona $45.24 358,148 $18.16
California $44.74 294,590 $17.82
new York $39.0 238,521 $14.68
Florida $30.63 259.009 $12.34
North Carolina $18.22 142,083 $6.98
Georgia $17.15 133,886 $6.57
Pennsylvania $16.0 102,165 $5.88
Ohio $14.8 103,811 $5.5
Massachusetts $13.99 87,174 $6.21

The full report provides detailed data on commercial real estate development in all 50 states and the District of Columbia, including direct spend; overall performance; Wages and salaries; and jobs supported.

The Economic Impacts of Commercial Real Estate, 2022 US Edition report was written by Brian Lewandowski, Jacob Dubbert, Michael P. Kercheval, Ph.D., and Richard Wobbekind, Ph.D., of the Business Research Division, Leeds School of Business, authored by University of Colorado Boulder, using data from Dodge Data and Analytics.

Since 2008, NAIOP has conducted this study to estimate the annual economic contribution of commercial real estate development to the US economy. This study is used by real estate professionals and local, state and federal officials and employees to understand and quantify the key economic benefits of commercial real estate development.

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