Texas Ranked #1 in CRE Development in 2011

A NAIOP Research Foundation Study was released this month noting commercial real estate and construction rebounds in 2011. The study shows that construction spending grew more than 12% from 2010 to 2011, with 238.3 million square feet built in 2011, which is 2.5% more than was developed in 2010. These new projects provide the capacity for 610,000 jobs in the United States, with commercial real estate development and construction contributing $262 billion to the US GDP, up 13% from 2010.

"2011 was a transition year for the U.S. economy and the construction sector," said the report's author, economist Stephen S. Fuller, PhD, Dwight Schar Faculty Chair, University Professor and the Director of the Center for Regional Analysis at the George Mason University. "The U.S. economy shifted from a federal stimulus to private-sector driven growth pattern and construction spending grew accordingly."

The following states posted the highest amounts of direct spending in all three phases of development across all categories of commercial real estate (number in parenthesis refers to that state's rank in 2010):

- Texas (Previous rank: 2), $7.9 billion in spending, 150,102 jobs supported
- New York (1), $6.5 billion in spending, 83,762 jobs supported
- West Virginia (48), $5.9 billion in spending, 100,889 jobs supported
- California (3), $4.5 billion in spending, 70,817 jobs supported
- Arizona (14), $4.2 billion in spending, 74,117 jobs supported
- Utah (26), $3.6 billion in spending, 77,550 jobs supported
- Florida (4), $3.4 billion in spending, 64,970 jobs supported
- Illinois (10), $3.0 billion in spending, 50,136 jobs supported
- Massachusetts (21), $3.05 billion in spending, 41,382 jobs supported
- (tie) North Carolina (7), $3.05 billion in spending, 55,920 jobs supported

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NAR Expects Steady Improvement in Commercial Market

The National Association of Realtors (NAR) held their 2010 Conference & Expo in New Orleans this month, coined "NARdiGras 2010: A Fountain of Inspiration" with 125 education sessions and insights from business leaders. NAR's Chief Economist Lawrence Yun and Hugh Kelly, clinical professor of real estate at New York University Schack Institute of Real Estate, shared their predictions surrounding the commercial market and indicated a slight improvement in commercial lending.

"Banks' profits have returned to healthy levels. As a result, it is inevitable they will return to the business they were created for, which is lending," said Yun. "Commercial real estate has experienced a sharp price correction, but there is still a shortage of buyers because of lack of adequate capital resources." Yun said with imports and exports in the U.S. rising, the demand for industrial space will improve. His commercial forecast shows steady improvement in the market with rents stabilizing and net absorption slowly improving. Yun also predicts a moderate GDP expansion of 2 percent to 2.5 percent in the next two years and an unemployment rate of eight percent in 2012 and six percent in 2015.

Kelly pointed out that most commercial mortgages have been random and idiosyncratic, stressing that the lending environment should not remain that way. "The banks are in the driver's seat, meaning they can cherry-pick deals and there is no stigma to turning away business," said Kelly. "The capital flow in the commercial real estate market has been very selective. To achieve full recovery, lending practices must improve."

For more news and information visit Blumberg Capital Partners.