The commercial real estate industry created $326 billion in wages and supported 8.3 million U.S. jobs directly contributing a whopping $1.34 trillion to the U.S. GDP last year according to data released in an annual study the Commercial Real Estate Development Association (NAIOP).
The study aims to measure the economic impact of office, industrial, warehouse and retail development and it illustrates the breadth of the commercial real estate sector as a whole, according to Thomas J. Bisacquino President and CEO of NAIOP.
“When you put the industry together- all of commercial is very impressive. It’s a massive driver for the economy and the salaries and jobs that impact our local communities,” said Bisacquino in an interview with Connected Real Estate Magazine.
NAIOP has conducted the yearly analysis since 2008 to estimate the often-under-reported economic contribution of commercial real estate development to the U.S. economy.
The comprehensive study reviews the entire scope of commercial real estate services from construction to professional and business offerings such as architecture and engineering, legal, marketing and management, landscaping and interior design.
The report found that hard costs such as construction, labor, and materials were the top contributors to the U.S. economy totaling $315.95 billion. Tenant improvements had the second highest contribution with $110 billion, followed by soft costs such as legal marketing and administration, which were $94.6 billion. Commercial site development, which includes landscaping services, parking, and other off-site improvements contributed the least to the economy with $80.15 billion.
Data from NAIOP’s study is used to inform policy decisions made by lawmakers who are often well-intentioned, but misguided, says Bisacquino.
“When it comes to policy, the things that don’t happen are as important as those that do. There has to be an understanding that buildings have to be built as investments. We use data to talk to policymakers and make sure that energy, tax and other mandates are placed appropriately,” Bisacquino said.
As an example, data from the report helped vital stakeholders understand the impact of implementing the green roof policy in the city of Denver.
While the green roof mandate made sense for some buildings, prohibitive rehab costs of adding green roofs to older properties which could not stand the structural weight of would have them obsolete and unusable, resulting in loss of jobs in many community jobs.
However, the data from the report enabled state legislators, and the environmental community to reach a viable solution that was acceptable to all parties.
“These numbers are critical to everybody. All communities want jobs and taxpayers,” highlighted Bisacquino. “We can show what has been happening state by state to help decision-makers keep key stakeholders in the game.”
The nationwide analysis revealed that Texas (400,986), Tennessee (268,146) and New York (207,915) experienced the highest levels of jobs either created or supported by the sector.
“The sharing economy and technology are enabling us to put all things to use and creating more jobs,” said Bisacquino.
Along with steady and increased job growth, driven by the stable economic climate held in place by low interest and unemployment rates, there is also a shift the kind of talent demanded by the commercial real estate sector.
Advancements in CRE technology, new flex-space and coworking business models and competition for talent has created demand for new kinds of jobs.
The commercial real estate firms are now hiring data analysts, occupancy and space planners and community managers, roles which did not exist in the sector 10 to 15 years ago.
“Most people think of the jobs in our industry in terms of construction, but it’s becoming more sophisticated with use to tech and data. Data is king right now. There’s so much data in our industry people don’t know what to do with or how to analyze it,” said Bisacquino.
As technology plays an increasingly important in the sector, landlords need to recognize the importance of meeting tenant expectations.
“There’s a saying we have here at NAIOP. A landlord can’t do better than his or her tenant. Otherwise, how are they going to be successful,” said Bisacquino said.
As space increasingly becomes an amenity, the key to making tenants successful today is adopting technology solutions that improve their tenant’s bottom-line.
The convergence between technology and commercial real estate has become so relevant to the industry that Apple co-founder Steve Wozniak will deliver the keynote address at Converge 2019, NAIOP’s annual convention taking place in October of this year. A 30-minute audience question and answer session will follow Wozniak’s keynote.