HOUSTON – (By Dale King) – Texas leads the nation in commercial development of warehouse, flex and retail real estate space, according to a study by the NAIOP commercial real estate organization.
The Lone Star State comes in second for office development behind New York, and finishes Number 2 overall (ranking for all 50 states), slightly outdone again by the Empire State.
“The reason for the high development volume in Texas compared with other states is simple: Texas is producing more jobs and has greater population growth than other states and regions,” said Carleton Riser, president of Transwestern Development Co., commenting on the study’s favorable results for Texas.
“That population growth comes from both a relatively high birth rate and consistent strength in migration. This produces a positive feedback loop for economic vibrancy,” said Riser.
Houston, Dallas and Austin have been among the nation’s leaders in job growth and population increases for several years.
The top 10 states ranked by construction value for office, industrial, warehouse and retail combined are: New York, Texas, California, Louisiana, Florida, Georgia, Michigan, Illinois, Pennsylvania and Massachusetts.
“The Economic Impacts of Commercial Real Estate,” published by the NAIOP Research Foundation, measures the contribution to GDP, salaries and wages generated and jobs supported by the development and operations of commercial real estate.
Commercial real estate in Texas supports 310,994 related jobs and contributes $44.399 billion to the state’s economy, the study says.
Nationally, development, construction and ongoing operations of new commercial real estate – office, industrial, warehouse and retail – supports 6.25 million American jobs (new and existing) and contributed $861 billion to America’s Gross National Product (GNP) in 2016. Last year, 410 million square feet of office, retail, warehouse and industrial space was built – capacity enough to house more than a million new workers.
“The importance of commercial development to the U.S. economy is well established, and the industry’s growth is critical to creating new jobs, improving infrastructure and creating places to work, shop and play,” said Thomas Bisacquino, NAIOP president and CEO. The NAIOP – the Commercial Real Estate Development Association, is based in Herndon, Va.
“Commercial real estate is a robust contributor to national and state economies, and NAIOP is dedicated to working with the administration, Congress and state legislators to develop bipartisan infrastructure investment and incentives for capital investment that empowers our industry to expand.”
A key factor in the economy’s growth in 2016 was the continuing expansion of the construction sector, says the study. Construction spending has increased each year since 2011, gaining 48.7 percent between 2011 and October 2016. For the year ending in October 2016, total construction spending was up 3.4 percent, exceeding the GDP growth rate for this period.
Office construction expenditures totaled $36.6 billion in 2016, increasing by 28.7 percent from 2015. Retail construction spending totaled $17.2 billion in 2016, a decrease of 7 percent from gains of 8.2 percent in 2015.
Warehouse construction totaled $13.6 billion in 2016, registering a sixth consecutive year of increased expenditures and gaining 12.7 percent from 2015.
Industrial construction spending decreased sharply for a second year in 2016 to $15.5 billion, declining 29.9 percent from 2015. The study says this pullback in industrial/manufacturing construction can be attributed to the downturn in the energy sector and a weakening in global demand for U.S. manufactured goods due largely to unfavorable exchange rates with America’s major trading partners.
By compensating for slower-growing segments of the economy, the construction sector’s gains will provide the foundation that should extend the economy’s expansion into the next decade, making it the longest business cycle in history. The report also notes that if the economy avoids recession through mid-2020, it would tie the previous longest business cycle record of 10 years, achieved in the 1980s.