Development Magazine Spring 2011

Development - Ownership

First Look - A Glass Half Full

The national economy is now in the early stages of recovery from its longest and deepest recession since World War II. Now known as the Great Recession, the 2008-2009 recession started in December 2007 and ended in June 2009. During that period, from peak to trough, the economy declined by a total of 4.1 percent.

While the effects of this recession were felt by all segments of the economy, the construction sector was disproportionally impacted by the collapse of the financial markets and subsequent decrease in demand for new housing and non-residential building space. Residential construc­tion peaked in 2005 with starts total­ing 2.07 million units and declined to 554,000 housing units in 2009, a de­crease of 73 percent. Non-residential building construction outlays contin­ued to increase during the first three years of declining residential con­struction activity, peaking in 2008. However, with the national economy’s accelerating recession, non-residential building construction outlays fell by 20.4 percent in 2009.

  • Although construction spending declined in 2009 due to the reces­sion’s impact, it still generated a positive contribution to the U.S. economy.
  • Building and non-building (roads, bridges, etc.) construction outlays totaled $907.8 billion in 2009, ac­counting directly for approximately 6.4 percent of the nation’s Gross Domestic Product (GDP).
  • Non-residential building construc­tion outlays accounted for 46 per­cent of all construction spending in 2009, exceeding the share ac­counted for by residential building construction spending for a second consecutive year.

The total economic benefit of office, industrial, warehouse and retail con­struction spending in 2009 was $288 billion.

Table showing the summary of Office, Industrial, Warehouse and Retail Construction and Annual Operations Impacts on the U.S. Econony, 2009

This construction spending:

  • supported 2.4 million jobs (full-time, year-round equivalent) across all sectors of the economy; and
  • generated personal earnings totaling $89.1 billion.

In addition, maintaining and servicing the 264.4 million square feet of new office, industrial, warehouse and retail building space built in 2009 will require $871.2 million in annual operating outlay each year going forward. Each year, adjusted for inflation and changes in the level and quality of services, these new operating outlays will:

  • Contribute $2.52 billion to the national economy (GDP);
  • Support 21,222 jobs; and
  • Generate total personal earnings of $801.4 million.

While residential building construc­tion spending is projected to recover in 2011, a year before non-residential building construction spending is projected to increase, the GDP growth rate is not projected to exceed three percent until 2012. Three percent is the rate fast enough to significantly reduce the unemployment rate. The first year that residential and non-residential building construction spending are projected to both be increasing is 2012.

 

From the Archives: Development Ownership Articles from the Previous Issue

America Center exterior at night

America Center - An Environmentally Advanced Office Campus 

There is continued focus on the impact businesses have on the environment and the communities that surround them. For Legacy Partners, this has inspired a commitment to finding ways to align investment goals with an approach to development that adopts sustainability and eco-conscious design as a guiding influence.

Development conference 10 tenant panel

Development '10 Conference Wrap-up: Industry in 2011 - Glimmers of Light, but Still in Transition 

Real estate fundamentals may still be shaky. We may be bumping along the bottom for some time, but panelists and attendees at NAIOP’s Development ’10 conference were buoyed by renewed leasing and sales activity in some markets. Attendees also noted a clear improvement in the availability of capital – even if that capital is veering mainly to what the pros call “trophy or trauma.”