Commercial construction not appreciated-study
NEW YORK (Reuters) - U.S. commercial construction contributed nearly as much to the economy as home building did at the height of the recent housing boom, according to a study by the National Association of Industrial and Office Properties Research Foundation.
While it received less attention, the contribution of new shopping centers, offices and warehouses to the U.S. economy totaled $498.4 billion in 2005, roughly $1 billion less than housing, said Stephen Fuller, director of the Center for Regional Analysis at George Mason University.
The National Association of Industrial and Office Properties, a trade association representing developers, owners, investors and others in industrial, office and mixed-use commercial real estate, sponsored the study.
"This is a bigger industry than is perceived by government officials, by the general public, even many people in the industry because it's so diverse," Fuller said. "It affects other sectors as we plan, build and occupy buildings.
Using 2005 data, the latest comprehensive data available, Fuller determined that commercial real estate construction spending accounted for $498.4 billion of the $11.9 trillion of U.S. gross domestic product that year.
"Construction of all building types is roughly 10 percent of the U.S. economy and commercial is almost half of that," he said.
About $228.9 billion of the $498.4 billion was spent on fees for architects, lawyers, engineers, and others engaged in the activities that prepare a site to receive the building. It also included money owners invest in renovation.
The actual costs of labor and materials to build warehouses, office buildings or shopping centers, totaled $265.9 billion in 2005.
Some $3.6 billion was spent on maintenance and security, the study.
Fuller said the commercial construction's impact on the economy was greater than he expected. Every $1 spent on commercial construction generated $2.34 in total benefits for the economy as workers spent the income they earned.
In 2005, commercial construction accounted for 4.2 million full-time jobs, which generated $155.8 billion in new earnings. Every $1 million spent on commercial construction supported 28.5 jobs, the study said.
"It's the scale and the cumulative impacts that are big and people need to be reminded of that," Fuller said.
But commercial real estate spending growth could slow as the lending that is the powering it is curtailed by more stringent lending requirement, another economist said. That already has happened to a greater degree in residential lending.
"The emergence of tighter lending standards will begin to dampen the growth in commercial construction in the latter half of 2007 and into 2008," Robert Murray, McGraw-Hill Construction chief economist said.
