Updated economic multipliers reflect more technology and fewer workers.
IN 2015, DEVELOPMENT activity in the office, industrial and retail sectors supported 3.2 million new and existing jobs, generated $450 billion to U.S. gross domestic product (GDP) and resulted in salaries and wages totaling $145 billion. These are the latest figures generated by economist Stephen S. Fuller, Ph.D., senior advisor and director for special projects of the Center for Regional Analysis at George Mason University, who authored the NAIOP Research Foundation report, “Economic Impacts of Commercial Real Estate, 2016 Edition.”
These figures are based on data supplied by Dodge Data and Analytics, which totaled net new construction of office, industrial, warehouse and retail structures in 2015 at 429 million square feet, compared to 443.2 million square feet in 2014.
These robust economic and square footage figures actually represent a slight decrease from 2014, largely because of 1) changes in the economic multipliers used by the U.S. Bureau of Economic Analysis (BEA) to calculate the impacts of development and 2) deep contraction in the energy industry.
In fall 2015, the BEA revised the economic multipliers that measure the effects of investment, spending and re-spending on economic markers such as jobs, salaries and wages, and GDP. Because of the federal budget sequester, these multipliers had not been updated since 2013. Data used to create the 2013 multipliers — which were used in the analysis of 2014 data — reflected economic conditions that existed before the 2007 recession. Most of the updated BEA multipliers used in this study were revised downward, reflecting “economic conditions characterizing the post-recession economy, which included greater efficiencies from technological advances, resulting in fewer workers,” notes Fuller.
Much of the decline in square footage under construction is attributable to a decline in energy prices that made it difficult to justify construction of new energy facilities within the industrial category.
As a result of the revised multipliers and declining energy sector construction:
- Total contribution to U.S. GDP reached $450.38 billion in 2015, down from $528.09 billion in 2014.
- Personal earnings (wages and salaries paid) totaled $145.70 billion in 2015, down from $168.42 billion in 2014.
- Jobs supported (a measure of both new and existing jobs) reached 3.21 million in 2015, down from 3.94 million the year before.
This annual report includes numerous appendices that break out three key measures of economic activity: jobs, earnings (salaries and wages) and output (contribution to GDP). The data are presented by state and by product type. The report also provides the economic multipliers for the three economic markers in each state, so developers can calculate the economic benefits of projects in their pipelines.
The table above provides an example of how one can calculate state economic impacts using these multipliers.
For a copy of the full report, go to www.naiop.org/contributions2016.