The Impact of U.S. Commercial Real Estate Development and Operations Grows; Supports 9.2 Million Jobs, Contributes $1.14 Trillion to the Economy

The impact of new development and of the ongoing operations of existing commercial real estate buildings in the United States – office, industrial, warehouse and retail – has grown to support 9.2 million American jobs and contribute $1.14 trillion to the U.S. GDP in 2019, an increase from 8.3 million jobs and a contribution of $1.0 trillion to GDP in 2018. Based on the existing stock of commercial buildings — totaling 49.6 billion square feet at the end of the third quarter of 2019 — direct spending on building operations totaled an estimated $173.0 billion and contributed $464.0 billion to GDP. In addition, 563.3 million square feet of new office, industrial, warehouse and retail space newly constructed in 2019 has the capacity to house 1.4 million new workers with a total estimated annual payroll of $83.5 billion. The findings were presented in the annual study, “Economic Impacts of Commercial Real Estate, 2020 U.S. Edition,” released this week by the NAIOP Research Foundation. The study measures the contributions to GDP, salaries and wages generated, and jobs created and supported from the development and operations of commercial real estate. The study broke out several key measures by commercial real estate industry sector: Click to read more at www.naiop.org.

February 2020 Commercial Real Estate Market Trends and Outlook

This latest Commercial Real Estate Trends & Outlook Report discusses trends in the small commercial market (transactions that are typically less than $2.5 million) based on a survey of commercial REALTORS® about their 2019 Q4 transactions and the latest publicly available data. Respondents reported commercial dollar sales volume rose 4% in 2019 Q4 from one year ago, new leasing dollar volume rose 3%, and commercial development (in square feet) rose 5%. Among respondents, the median commercial sales price growth in 2019 Q4 from one year ago was 3%. Apartment, industrial warehouse and flex, and office class A properties had the lowest cap rates, with a median of 6.5%. Among respondents, the median cap rate for retail mall properties was also 6.5%. The retail trade industry appears to be adapting to the challenge coming from robust e-commerce sales. In November 2019, the retail trade industry gained 15,300 net new jobs from one year ago, in contrast to the job losses in past months. Click to read more at www.nar.realtor.

Commercial/Multifamily Borrowing Climbed to a New High to Closeout 2019

SAN DIEGO (February 9, 2020) – A 7 percent increase in commercial and multifamily mortgage originations in the fourth quarter of 2019 capped off what was a strong 2019 for the market, according to preliminary estimates from the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, released here today at the 2020 Commercial Real Estate Finance/Multifamily Housing Convention & Expo. “Commercial and multifamily borrowing and lending hit a new high during the fourth quarter of 2019, surpassing the previous record from the second quarter of 2007,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “A pullback in lending by Fannie Mae and Freddie Mac suppressed multifamily borrowing during the quarter, but growth for most other property types made up the difference. Initial indications are that 2019 set new records, with double-digit growth in mortgage bankers originations, as well as new highs in originations for banks and life insurance companies.” Added Woodwell, “Low-interest rates and solid property fundamentals should help 2020 continue the trend of record borrowing and lending.” Originations climb 7 Percent in the fourth quarter of 2019. Click to read more at www.mba.org.

Never Mind the Internet. Here’s What’s Killing Malls.

It has been a tough decade for brick-and-mall retailers, and matters seem only to be getting worse. Despite a strong consumer economy, physical retailers closed more than 9,000 stores in 2019 — more than the total in 2018, which surpassed the record of 2017. Already this year, retailers have announced more than 1,200 more intended closings, including 125 Macy’s stores. Some people call what has happened to the shopping landscape “the retail apocalypse.” It is easy to chalk it up to the rise of e-commerce, which has thrived while physical stores struggle. And there is no denying that Amazon and other online retailers have changed consumer behavior radically or that big retailers like Walmart and Target have tried to beef up their own online presence. But this can be overstated. To begin with, while e-commerce is growing sharply, it may not be nearly as big as you think. The Census Bureau keeps official track. Online sales have grown tremendously in the last 20 years, rising from $5 billion per quarter to almost $155 billion per quarter. But Internet shopping still represents only 11 percent of the entire retail sales total. Click to read more at www.msn.com.

The Impact of U.S. Commercial Real Estate Development and Operations Grows; Supports 9.2 Million Jobs, Contributes $1.14 Trillion to the Economy

The impact of new development and of the ongoing operations of existing commercial real estate buildings in the United States – office, industrial, warehouse and retail – has grown to support 9.2 million American jobs and contribute $1.14 trillion to the U.S. GDP in 2019, an increase from 8.3 million jobs and a contribution of $1.0 trillion to GDP in 2018. Based on the existing stock of commercial buildings — totaling 49.6 billion square feet at the end of the third quarter of 2019 — direct spending on building operations totaled an estimated $173.0 billion and contributed $464.0 billion to GDP. In addition, 563.3 million square feet of new office, industrial, warehouse and retail space newly constructed in 2019 has the capacity to house 1.4 million new workers with a total estimated annual payroll of $83.5 billion. The findings were presented in the annual study, “Economic Impacts of Commercial Real Estate, 2020 U.S. Edition,” released this week by the NAIOP Research Foundation. The study measures the contributions to GDP, salaries and wages generated, and jobs created and supported from the development and operations of commercial real estate. The study broke out several key measures by commercial real estate industry sector: Click to read more at www.naiop.org.

Emerging Trends for 1031 Investors

Because of the increased interest in 1031exchanges, we invited a group of industry experts to talk about the trends they’re seeing in the market, including trading into Delaware Statutory Trusts (DSTs) and how to exchange oil and gas. “… you want the diversification …” The first topic out of the gate was umbrella partnership REITs (or UPREITs). An alternative
to 1031 exchanges, UPREITs offer a way for an investor who is looking to liquidate some real estate to defer taxes. You would sell or contribute that property to the REIT. “That REIT gives you operating partnership units, then you can control the liquidity. There are no taxes on that whatsoever until you transfer those operating partnership units to shares of the stock.
Once you transfer that share stock, that’s not real property and you’re going to be taxed there,” explained Jay Dobbs, senior managing partner of
Effective 1031 Planning. “That REIT gives you operating partnership units,
then you can control the liquidity. There are no taxes on that whatsoever until you transfer those operating partnership units to shares of the stock.
Once you transfer that share stock, that’s not real property and you’re going to be taxed there,” explained Jay Dobbs, senior managing partner of Effective 1031 Planning. Click to read more at www.rednews.com.