New commercial real estate development in the U.S. remains a major driver of economic activity, creating jobs, generating personal earnings, and producing significant contributions to the national and state economies, according to the Economic Impacts of Commercial Real Estate research study conducted annually by the NAIOP Research Foundation.

The combined economic contributions of new commercial building development and the operations of existing commercial buildings in 2023 resulted in direct expenditures of $913.1 billion and the following impacts on the U.S. economy:

• Contributed $2.5 trillion to U.S. GDP
• Generated $881.4 billion in personal earnings
• Supported a total of 15 million jobs

Total construction spending was up an estimated 5.6% in 2023 and accounted for approximately 20.6% of total GDP (inclusive of the multiplier effect). The subsector of nonresidential construction was a strong performer for the industry at large in 2023, with the value of completions increasing 21.9% year-to-date in October 2023.

• Office construction expenditures averaged $49.8 billion over the past five years (2019-2023). Office activity totaled $56.3 billion in 2023, up 5.4% from 2022. It is important to note that the data sources used for this report categorize data centers as office construction.
• Industrial (manufacturing) construction expenditures averaged $52.8 billion over the past five years (2019-2023). Industrial activity totaled $79.5 billion in 2023, representing a 22.1% decrease from 2022. However, construction activity previously surged 217.2% from 2021 to 2022 ($32.2 to $102.1 billion).
• Warehouse construction outlays averaged $45.4 billion over the past five years (2019-2023). Warehouse activity totaled $51.8 billion in 2023, down 14% from 2022.
• Retail construction expenditures averaged $16.6 billion over the past five years (2019-2023). Retail activity totaled $19.3 billion in 2023, down 0.7% from 2022.

The construction industry has been in a generally strong growth cycle since the end of 2020. Construction employment averaged 7.96 million jobs in 2023. The industry added more than 709,000 jobs over three years (2021-2023) and added an estimated 218,000 jobs (2.8% growth) in 2023 — a faster pace of growth than the overall job market. Despite the growth in jobs, there were indications of a construction slowdown in 2023.

Slow growth in real (inflation-adjusted) GDP (1.2%) and real business investment (0.7%) is expected in 2024—both evidence of cooling demand for construction and real estate, according to the report. While expected slowdowns in economic growth in 2024 could dampen demand, the total value of construction is anticipated to increase modestly, with growth in nonresidential construction, particularly infrastructure, expected to outweigh declines in residential construction.

“Overall, commercial real estate continues to be a vibrant and important contributor to the nation’s economy,” said Marc Selvitelli, CAE, president and CEO, NAIOP. “We are seeing some adjustment in construction activity, notably in the industrial sector, whose growth had been on a record-setting trend following changes to the retailing paradigm driven by the pandemic and other economic forces. We are bullish that as those forces settle out, commercial real estate will expand in 2024.”

The full report is online: naiop.org/contributions24

The “Economic Impacts of Commercial Real Estate, 2024 Edition” report is authored by Brian Lewandowski, Adam Illig, Ethan Street and Richard Wobbekind, Ph.D., Business Research Division, Leeds School of Business University of Colorado Boulder.

Since 2008, NAIOP has conducted this study for purposes of estimating the annual economic contribution of commercial real estate development to the U.S. economy. This study is used by real estate professionals and municipal, state, and federal officials and employees, to understand and quantify the key economic benefits of commercial real estate development.