Economy Watch: As Percentage of GDP, CRE Edges Up
- May 12, 2016
The Bureau of Economic Analysis reported on Wednesday that investment in non-residential structures decreased at a 10.7 percent annualized rate in the first quarter of 2016. That wasn’t a reflection on the health of commercial real estate, though it sounds like it should be. In fact, investment in most CRE sectors is still edging up.
The quarterly decline was due to less investment in petroleum exploration, which involves non-residential structures. “Mining exploration, shafts, and wells” investment is down 68 percent year-over-year,” the BEA said.
The bureau also reported statistics on CRE investment as a proportion of the entire U.S. GDP. The good news is that for offices and hotels, the proportions are trending up. Investment in offices increased in Q1, and is up 28 percent year-over-year. Now office investment is above the lows seen during previous recessions, at about 0.35 percent of GDP.
As for hotels, investment’s up to about 0.15 percent of GDP. Investment in shopping structures, on the other hand, peaked in 2007 and is still stagnant at about 0.1 percent of GDP. Investment in the property type, whose fundamentals are still weak, will probably stay low for some time.