Monday, June 11, 2007

Commercial Market Offsetting Residential Market

Office, Industrial and Retail Development Contributes $498 Billion Annually to GDP

There's a safety net for the country's slowing housing market, after all. It's the commercial real estate market.

According to analysis sponsored by the National Association of Industrial and Office Properties (
NAIOP) Research Foundation and recently reported, the thriving commercial development sector has buffered the slowdown in the residential sector.

Using 2005 data, the latest comprehensive data available, the study by Dr. Stephen S. Fuller, Director of the Center for Regional Analysis at George Mason University (
CRA), determined that in 2005 commercial real estate spending added $498.4 billion to the Gross Domestic Product (GDP), which was $11.9 trillion that year. By comparison, the federal government contributed $498.8 billion to the 2005 GDP* (Ref: The basis of commercial real estate's on-going sustainability lies in its three phases of development:

* Soft costs (such as architects, engineering, marketing, legal, management), site development, and tenant improvements
* Hard costs (actual construction costs)
* Building operations (such as maintenance, repair, custodial services, utilities, and management)

Combined, these three phases represent commercial real estate development's enduring financial strength and compounded economic impact.

And more recently, according to Census Bureau data as of April, 2007, an increase in the "hard costs" of construction of 2.4% more than makes up for the 1% drop in commercial construction.

Click here for more information about the commercial real estate analysis report.

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Copyright 2007 by Lawrence Yerkes. All Rights Reserved.

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