04.07.22
What Percentage of GDP is Commercial Real Estate?
In 2021, the total GDP in the United States was nearly 23 trillion dollars. What percentage of that was commercial real estate? How many jobs does commercial real estate support? More than you might think
Written by: Canyon Data
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Commercial real estate plays a critical role in global, national, and local economies. Not only does it provide a unique investment opportunity, it supports local growth, jobs, and adds millions of dollars in revenue to the country each year. But exactly what is commercial real estate, how do the numbers break down in terms of job growth, GDP, and expenditures, and how can knowing this commercial real estate data help you out? Keep reading to find out more.
What Is Commercial Real Estate?
The category of commercial real estate (CRE) contains buildings and properties that are used for commercial or income-generating purposes. While many CRE properties are leased out to tenants to conduct business in, multi-family dwellings like nursing homes or apartment buildings with more than five units are also considered commercial real estate properties.
In general, the types of commercial real estate investments include:
- Office space, ranging from rooms to entire buildings
- Retail storefronts, including standalone spaces, strip malls, and shopping malls
- Industrial buildings and warehouses generally used in manufacturing or storage
- Multi-family units including apartment buildings, nursing homes, and more
Why Is Real Estate Important to the Economy?
When it comes to commercial real estate, the impact on the economy cannot be overstated. Commercial real estate supports the creation of jobs in several industries, helps improve and grow infrastructure throughout the country, and is itself a symbol of economic growth. Let’s briefly explore each of these points further.
Job Creation
CRE supports the creation and sustainability of jobs through both the building of new properties and the ongoing support of existing properties. Manufacturing and construction jobs are supported all along the supply chain, not to mention the jobs in management, finance, and maintenance that go into maintaining a building. Roughly 8.5 million jobs were supported by commercial real estate in 2021.
Infastructure
Commercial real estate and infrastructure improvements have a reciprocal relationship. The creation of new properties or upgrading existing properties often includes a need for infrastructure improvements that support a healthy community. This includes road and bridge repair or enhancements, sidewalk installation or repair, the addition of bike lanes, advancements in public transportation, the expansion of broadband access, and more. On the other side, cities that take on these kinds of infrastructure improvements can draw in new CRE investors to foster growth.
Economic Growth
As locations thrive, so too does the need for housing, retail and restaurant locations, job opportunities, and more. The development of CRE is an early signifier of a thriving local economy, and it can spur the further development of retail, schools, tourism, residential and commercial real estate, manufacturing facilities, and more.
How Much Does Real Estate Contribute to GDP?
According to the Commercial Real Estate Development Association (NAIOP)’s 2022 Economic Impacts of Commercial Real Estate report, the commercial real estate contribution to GDP in 2021 in the US was approximately 1.2 trillion dollars—or about 5% of the total US GDP of 22.99 trillion dollars. This shows a steady increase over the last year, with commercial real estate contributing $1.01 trillion to US GDP in 2020.
The 2022 NAIOP research report also indicates that the combined economic contributions of both new commercial development and the operations of existing commercial properties resulted in direct expenditures of $434 billion. These expenditures generated roughly $418.7 billion in personal earnings alone.
When looking specifically at the construction expenditures among commercial properties, the numbers are generally bouncing back from 2020 numbers which were significantly impacted by the COVID-19 pandemic.
- Office: While office expenditures totaled about $43.5 billion in 2020, it decreased slightly to about $40.9 billion in 2021.
- Industrial (manufacturing): Industrial expenditures totaled 15.5 billion in 2020. However, 2021 showed a significant increase, with expenditures totaling $28.2 billion.
- Warehouse: Warehouse expenditures were 34.3 billion in 2020, and these numbers increased to 43.2 billion in 2021.
- Retail: While retail expenditures totaled 12.3 billion in 2020, 2021 showed a slight increase to 13.3 billion.
By looking at these numbers, it’s clear that commercial real estate as an industry and as an investment remains strong. One of the best ways to ensure a healthy future for CRE is by ensuring that everyone involved—from investors to appraisers to contractors and more—have the best information available to make the right decisions. And that’s where Canyon Data comes in.
The Future of Commercial Real Estate Data Is Here
Canyon Data stands at the crossroads of relationships and technology. At our core, we understand that commercial real estate is ultimately a driving force behind local economies everywhere, and working with local communities can only improve CRE investments—and community development.
Currently operating in Boise, Idaho, Canyon Data is providing the most exhaustive CRE data set on the market, with demographics, business listings, traffic maps, and up-to-date building approvals alongside accurate occupancy data and rental rates. All this information, and more, provides our partners with the data-backed insights they need to determine current and future market value. If you’re ready to learn more about how Canyon Data can help you make CRE decisions you can trust, contact us today.