NAIOP Publishes the 2018 Economic Impacts of Commercial Real Estate
NAIOP’s 2018 Economic Impacts of Commercial Real Estate helps identify where the shiny spots are when it comes to non-residential new construction. To CRE investors this information serves as a good indicator of where future CRE growth is expected to occur.
According to NAIOP, the value of nonresidential building construction continued its positive trend in 2017 increasing 3.4 percent. The growth reflected a mixed performance with increases in transportation, health care, retail, education, and lodgings partially offset by decreases in spending on manufacturing and office construction. Nonresidential building construction spending has increased 37 percent between 2013 through October 2017, reflecting an increase of $126.7 billion in construction spending over this period with all but two of the 10 building-type categories experiencing growth.
Construction data provided by Dodge Data & Analytics for office, industrial, warehouse and retail buildings offer a more refined definition of hard construction expenditures over time. Total hard construction expenditures for these four building types totaled $98.6 billion and increased by $15.6 billion or 18.9 percent from 2016. Office construction expenditures totaled $36.5 billion in 2017, with 0.4 percent decrease from 2016. Retail construction expenditures totaled $17.1 billion in 2017, a decrease of 0.8 percent from their 2016 level, after declining 7 percent in 2016.
Warehouse construction registered its seventh consecutive year of increased expenditures in 2017, up 55.7 percent from 2016 following a gain of 12.7 percent in 2015. Industrial construction spending that had decreased sharply for two consecutive years — down 46.2 percent in 2015 and 29.9 percent in 2016 — rebounded in 2017 gaining 52.5 percent. This pullback in industrial/manufacturing construction in 2015 and 2016 was attributed to the downturn in the energy sector and a weakening in global demand for U.S. manufactured goods due largely to the strength of the U.S. dollar and unfavorable trade policies with the United States’ major trading partners. Gains made in 2017 reflect the modest turnaround in the energy sector.
Total amount of new construction in 2017, as measured in square feet for these four building types, increased 27.4 percent from 2016 after having declined 4.5 percent between 2016 and 2015. The amount of space built increased for three of the building types (only retail space decreased in 2017) while the value of this added building space increased for two building types — industrial and warehouse. Office and retail building construction expenditures experienced small decreases in value compared to 2016, down 0.4 percent and 0.8 percent.
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