The longest economic expansion in U.S. history unexpectedly ended in February 2020 with the onset of the COVID-19 pandemic. Unemployment spiked and the economy plummeted, impacting every aspect of commercial real estate.
Construction and development, like many of the economy’s sectors, were disrupted by the pandemic. Warehouse construction spending was steady in 2020, but office, manufacturing and retail construction spending declined nearly 30%, as construction stoppages, pandemic restrictions and the economic contraction slowed development and reduced employment.
Office construction expenditures decreased, reflecting the current market and furthering expectation that the office market could be completely reshaped by the pandemic.
Warehouse construction soared to 61.7% of all new space built in 2020, continuing its positive trajectory to meet e-commerce demand.
Manufacturing construction spending was hard hit hard, declining 59.1% due in part to uncertainty in foreign markets and the shutdown of the global economy that disrupted supply chains and undermined domestic and foreign consumer demand.
Retail construction experienced its fifth straight year of decline, with expenditures falling 29.5% from 2019 and further solidifying a change in how consumers shop.
Altogether, new construction and development with direct expenditures for building operations of the existing stock of commercial buildings:
* Contributes $1.01 trillion to U.S. GDP
* Generates $338.1 billion in personal earnings and
* Supports 8 million jobs
Every $1 of construction spending generates triple the value to the economy. The cumulative effects of construction spending cycle through the economy, resulting in an overall contribution of 21% of all U.S. economic activity in 2020.
Combined commercial, residential, institutional and infrastructure construction, development and operations:
* Contributes $4.3 trillion to U.S. GDP
* Generates personal earnings of $1.5 trillion and
* Supports 28.5 million jobs.
While 2020 was not the year that had been expected, 2021 is forecast be a transitional year as the economy, employment and commercial real estate industry regain strength.
Commercial real estate. Where America….Lives. Works. Shops. Plays.
Data from Economic Impacts of Commercial Real Estate, 2021 U.S. Edition