NYC Dusk - 1920x729

Market Intelligence

NAIOP Study Sees Continued Growth in US Construction Spending [REPORT]

The NAIOP research foundation has released its annual report, Economic Impacts of Commercial Real Estate; a study filled with statistical analysis on pre-construction, site development, on-site construction, tenant improvement and operations expenditures across office, industrial, warehouse and retail real estate in the US.

Overall, the study found that construction expenditures will continue the recent pattern of year-over-year growth that has been on the rise since 2011, particularly in residential and commercial building construction. Additionally, the report predicts that the strength of the construction industry will help to buoy the national economy for several years to come. According to the report’s authors:

“The continuing recovery of the construction sector helped to buttress the national economy during 2013 as federal spending, as well as state and local government spending, was curtailed. This expected uptick in construction activity has helped to establish the foundation for the national economy’s expected positive performance over the remainder of this decade. Over the next five years, the construction sector is projected to grow (by value) at annual rates ranging between 2.5 percent and 6.5 percent. This continuing expansion will support GDP gains during this same period ranging from 2.4 to 2.8 percent, according to IHS Economics (April 2016 forecast). By compensating for slower-growing sectors, the construction sector’s gains will provide the foundation that will extend the economy’s expansion into the next decade…”

We’ve highlighted a few key findings for commercial development and operations expenditures, both historical and forward-looking, below. Bullet point text and graphics are taken directly from the report for accuracy with page numbers for reference.

Recent trends in CRE expenditures

  • In 2014 construction spending [residential and nonresidential] increased 13.9 percent and in 2015 it registered its third consecutive year of double-digit gains, increasing 13.0 percent. (13)
  • Nonresidential building construction spending increased in 2012 but held steady in 2013 before registering a solid 7.1 percent gain in 2014. In 2015, the value of nonresidential construction put in place increased 9.0 percent. (14)
  • The value of nonresidential building construction increased 15.8 percent during 2015, double its growth rate in 2014 (8.5 percent).
  • Office construction expenditures increased by 3.0 percent in 2015, building on their strong gain of 29.8 percent in 2014. Retail construction expenditures experienced a strong gain in 2015, up 8.2 percent from 2014, when they had registered a 1.1 percent gain. Warehouse construction registered a fifth strong year of increased expenditures in 2015, gaining 10.8 percent. Industrial construction spending decreased sharply in 2015, falling 46.2 percent, following a very strong gain in 2014, when it increased 74.2 percent. This pullback in industrial/manufacturing construction in 2015 can be attributed to the downturn in the energy sector and a slowdown in global demand for U.S. manufactured goods. (19)
  • The total square feet of new construction in 2015 for these four building types experienced a decline of 3.1 percent from 2014. (20)
  • In 2015, the inventory of existing office, retail and industrial/flex building space in the U.S. was estimated by CoStar and Newmark Grubb Knight Frank (NGKF) to total 45.07 billion square feet, reflecting a net increase of 1.98 billion square feet from 2014. This increase of 2.2 percent masks larger actual changes that have occurred in the inventory, including the retirement of older buildings as well as the modernization of existing buildings and the repurposing of some of these buildings from commercial to other uses, such as multifamily housing. The 2014-2015 net changes in the nation’s total building inventory are shown in Table 18. (31)

Predictions for 2016 and beyond 

  • [Despite] uncertain global economic conditions, forecasts for the U.S. economy beyond 2016 remain positive, with the broad base of the economy projected to grow through 2021 according to IHS Economics (April 2016). This positive economic outlook reflects continued strong performance of both residential and nonresidential construction with combined annual growth rates exceeding the projected GDP growth rate for each of the next five years. (11)
  • IHS Economics (April 2016) projects that fixed investment in both residential and nonresidential (retail, office, health care and warehouse) construction will increase between 8 and 10 percent in 2016. (11)
  • [N]onresidential building construction spending presents an uneven growth trend. It will be negatively impacted by weakness in manufacturing and energy-related construction in 2017 and 2018. Yet construction spending for retail, office and health care buildings is projected to remain strong in 2016, peak in 2017 and continue to grow through at least 2021. (14)
  • Construction spending for retail and office buildings was up in 2015 and is projected to continue growing in 2016 before peaking in 2017. Beyond 2017, it is expected to experience continuing but slower growth. Construction spending for warehouse and flex space has increased steadily since 2011, but is projected to register slower growth in 2016. These slower growth trends are expected to continue over the remainder of the decade. The growth projections for nonresidential construction reflect the expected moderate performance of the U.S. economy over the next five years, with growth rates peaking in 2017 and 2018 at about 2.7 percent and returning to around 2.4 percent in 2019. (16)

For complete statistical analysis on the US construction industry and its impact on GDP, personal earnings and job creation, please download the full report from

George Comfort & Sons chooses Honest Buildings

Pauline Nee

Written by Pauline Nee

Pauline is the head of content for Honest Buildings. For over twelve years in the commercial real estate industry, she has held diverse roles focused on product development, digital marketing, user research, web design and arts programming.

Subscribe Blog Banner