Commercial Real Estate’s Positive Economic Contributions Despite Spending Decline

Commercial real estate development and construction is a perpetual and valuable economic engine, with spending and directly related outlays generating a significant financial impact despite slowed growth and the nation’s economic strain, says a new report issued by the NAIOP Research Foundation.

The compounded economic impact of commercial development and construction spending reached $231.7 billion in 2010:

  • $120.2 billion in hard costs (actual construction costs) 
  • $111.5 billion in soft costs (architecture, engineering, marketing, legal, management), site development and tenant improvements
  • $1.86 billion in building operations (maintenance, repair, custodial services, utilities and management)

Total construction spending fell in 2010 for a fourth consecutive year, reflecting both the length and depth of the economic contraction of the national economy. Construction hard costs took the biggest hit, with spending for office, industrial, warehouse and retail totaling $41.7 billion – down 53.2 percent from 2007.  A total of 228.4 million square feet of building space was added to the inventory – a decrease of 72.8 percent compared to 2007. 

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