How do construction and development expenditures for office, retail, warehouse and industrial stack up? The NAIOP Research Foundation sought to define the spending for each in its newest research report, “Economic Impacts of Commercial Real Estate, 2016 Edition.”
“Hard costs” define the construction portion of development, including labor, materials and construction management during site development, building activity and tenant improvements. Combined, site development and tenant improvement expenditures totaled $50 billion in 2015, contributing $145.5 billion to U.S. GDP, generating $46 billion in new personal earnings and supporting 1.03 million jobs.
Take a look at where four property types ranked for construction expenditures in 2015:
- Office construction expenditures increased by 3.0 percent in 2015, building on its strong gain of 29.8 percent in 2014.
- Retail construction expenditures experienced a strong gain in 2015, up 8.2 percent from 2014, when it had registered a 1.1 percent gain.
- Warehouse construction – which includes e-commerce fulfillment and distribution centers – registered a fifth strong year of increased expenditures in 2015, gaining 10.8 percent.
- Industrial construction spending decreased sharply in 2015, falling 46.2 percent, following a very strong gain in 2014, when it increased 74.2 percent. This pullback in industrial/manufacturing construction in 2015 can be attributed to the downturn in the energy sector and a slowdown in global demand for U.S. manufactured goods.
Overall, total hard construction expenditures for these four building types decreased in 2015 by 7.5 percent from 2014.
This post is part of a series of informational posts on the Research Foundation’s valuable report, “Economic Impacts of Commercial Real Estate, 2016 Edition.” Download the full report and check back for more analysis and excerpts.
Kathryn Hamilton, CAE, is Vice President for Marketing and Communications at NAIOP Corporate.