New Report Indicates 2014 Was Best Year for Commercial Real Estate Development Since 2007; Projections Indicate 2015 Will be the Best Year of the Decade

New Report Indicates 2014 Was Best Year for Commercial Real Estate Development Since 2007; Projections Indicate 2015 Will be the Best Year of the Decade

4 Million U.S. Jobs Supported by development activity along with $528 billion in total economic contribution

WASHINGTON, D.C. – July 9, 2015 – (RealEstateRama) — The commercial real estate development industry in 2014 saw its best year since 2007, according to an annual report on the state of the industry released today by the NAIOP Research Foundation.  The report, entitled “The Economic Impacts of Commercial Real Estate,” determined that the economic contributions yielded by the development process increased significantly by 40 percent over the previous year, the largest gain since the market began to recover in 2011. Direct expenditures for 2014 totaled $174.31 billion, up from $124 billion the year before, and resulted in the following economic contributions to the U.S. economy:

  • Total contribution to U.S. GDP reached $528.09 billion, up from $376.35 billion in 2013.
  • Personal earnings (or wages and salaries paid) totaled $168.42 billion, up from $120.02 billion in 2013.
  • Jobs supported (a measure of both new and existing jobs) reached 3.94 million in 2014, up from 2.81 million the year before.

“The industry is strong today and making an even bigger contribution to our national economy, but it still has room to grow.  Office and industrial were very strong and we believe the activity in these areas will keep accelerating.  We hope Congress can agree on a bipartisan infrastructure investment package and continues to provide incentives for capital investment to keep the job creation going strong,” said Thomas J. Bisacquino, NAIOP president and CEO.

As Construction Spending Increases the U.S. Economy Grows

2015 projections show accelerating construction spending, with single-digit gains in fixed investment in commercial structures such as office, retail, health care and distribution facilities. As construction continue to grow between 2014 and 2015, the U.S. economy’s growth rate is projected to increase from 2.4 percent in 2014 to 3.0 percent in 2015 and continue its expansion at least through 2020, according to IHS data in the report.

Summary of Performance by Product Type:

  • Office construction expenditures increased by 29.8 percent in 2014, extending their gain of 23.3 percent in 2013.
  • Retail construction expenditures also increased in 2014, but only slightly, increasing 1.1 percent from 2013, when they had registered a 4.8 percent gain.
  • Warehouse construction registered a fourth strong year of increased expenditures in 2014, gaining 19.7 percent. In 2011, expenditures for warehouse construction increased 17.8 percent; in 2012, they increased another 28.4 percent; and in 2013, they increased 38.1 percent.

Preconstruction and Site Development Expenditures Account for Nearly Half of all Expenditures in 2014:

The preconstruction development phase continued to contribute to nearly half of all expenditures in 2014. Soft construction costs (architecture, engineering, marketing, legal, management, administration), and site development costs (grading, paving, landscaping, roadway, parking, off-site improvements), totaled $56.2 billion in direct expenditures, resulting in:

Direct Expenditures Total Economic Contribution Wages and Salaries Jobs Supported
Soft Construction $27.64 Billion $75.33 Billion $25.18 Billion 508,713
Site Development $28.56 Billion $88.14 Billion $27.90 Billion 668,953
Total $56.20 Billion $163.47 Billion $53.08 Billion 1,177,666

Top 10 States by Development Value for Office, Industrial, Warehouse and Retail

State Direct Expenditures (In Billions of 2014 Dollars) Jobs Supported
1. Texas $41.981 776,128
2. California 13.369 218,142
3. New York 10.512 132,535
4. Louisiana 6.401 106,916
5. Nevada 6.032 90,529
6. Pennsylvania 6.004 103,710
7. Florida 5.850 113,558
8. Washington 5.057 79,848
9. Illinois 4.925 81,658
10.  Ohio 4.022  75,968

The report includes detailed data on commercial real estate development activity in all 50 states, and also ranks the top 10 states specifically 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.

An executive summary and the full report is online: www.naiop.org/contributions2015.

 

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About NAIOP: NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial, retail and mixed-use real estate. NAIOP comprises 15,000 members in North America. NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visit www.naiop.org.

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