Each year, NAIOP, the Commercial Real Estate Development Association, releases a report on the state of the commercial real estate industry with thoughts on the previous year and forecasts for the current year. The NAIOP annual report contains strategic insights from the nation’s foremost commercial real estate, economic, and public policy experts through their Research Foundation’s Distinguished Fellows Program.
This year’s report focused on the challenges of 2021, from the ongoing COVID crisis to supply shortages to stalled back-to-office plans. The 2022 report further examined key hot-button issue and trends unfolding in the current year. Here are the key takeaways from the NAIOP annual report.
Economic Impact of CRE
Commercial real estate generates significant economic activity, and 2021 was no different. In the NAIOP annual report, the Research Foundation examined the wages, salaries, and other financial factors stemming from the commercial real estate industry in the US for the previous year. They found the following were generated from commercial, residential, institutional, and infrastructure development of existing commercial buildings:
- $4.8 trillion USD or 21% of total GDP
- 32.7 million US jobs, including new job creation and support of existing jobs
- Substantial personal earnings and state revenues
New Development Approvals Index
NAIOP announced the creation of a new resource to help developers better evaluate local approval processes. This New Development Approvals Index compares the process of obtaining entitlements and permits across various local jurisdictions. This index will help new developers overcome the inconsistency and costliness inherent in a fragmented approvals system to make investment decisions clearer.
Future Trends for Industrial and Office Space Demand
The NAIOP annual report announced two studies that provided a strategic outlook on current and future trends relating to commercial real estate market in the US.
On the office space side, their study showed that office net absorption was negative throughout 2021. Yet heading into 2022, absorption is gradually digging out of this whole and steadily improving. In the final quarter of 2021, the net absorption is forecasted to reach 8.3 million square.
Some of the factors contributing to this positive revision include declining unemployment rates, more workers returning to the office, and an improving economy.
On the industrial space side, according to the forecast from Q# of 2021, demand is strong. Industrial real estate is expected to remain strong in the long term in spite of rising interest in ecommerce.
According to the study’s forecast, total net absorption for the last half of 2021 is expected to be 162.6 million square feet. This represents a quarterly average of 81.3 million square feet. The forecast for 2022 is even more positive, with projected net absorption at nearly 335 million square feet, reflecting an 83.6 million square feet average per quarter.
New Talent Entering CRE
Commenting on prospects for new professionals beginning a career in CRE – with its pros and cons – F.E. “Skip” Kalb, the 2022 NAIOP Research Foundation Chair, commented:
I’m enthusiastic about the young professionals coming into commercial real estate…This generation grew up in a technology-driven world, and they offer unique perspectives into the data and trends shaping commercial real estate.