Despite all the economic turmoil in 2021, the commercial real estate sector grew and continued to be a major driver of the American economy.
Direct expenditures in new CRE developments climbed from $201.4 billion in 2020 to $239.7 billion in 2021, according to the NAIOP Research report “Economic Impacts of Commercial Real Estate, 2022.” That development contributed $653 billion to the U.S. GDP (up from $548.6 billion in 2020), produced $231.5 billion in personal earnings (up from $194.5 billion) and supported 4,257,175 jobs (up from 3,575,277 the previous year).
Meanwhile, operations of existing buildings produced direct expenditures of $194.5 billion in 2021 (up from $183.3 billion in 2020), contributed $531.5 billion to the U.S. GDP (up from $500.8 billion), and generated personal earnings of $187.2 billion (up from $176.4 billion).
In Maryland, commercial real estate development contributed $5.6 billion to the state GDP in 2021, generated $2.1 billion in wages and salaries, and supported or created 36,234 jobs, according to the NAIOP report.
Total economic activity varied among CRE sectors. Construction data compiled by Dodge Data & Analytics showed that total construction expenditures for office, industrial, warehouse and retail buildings totaled $125.6 billion in 2020 – up $20 billion or 18.9 percent from 2020. Industrial construction grew 81.3 percent in 2021 to total $28.2 billion and warehouse construction rose 25.9 percent to total $43.2 billion. Retail construction began to rebound in 2021, climbing 8.3 percent to $13.3 billion. Office construction, however, decreased 5.9 percent to $40.9 billion.
MacKenzie Commercial Real Estate’s Local Outlook report for the fourth quarter of 2021 reflected the challenges in the office market. Net absorption of office space in Central Maryland was -261,571 square feet in Q4 and -877,247 for all of 2021, creating an overall vacancy rate of 12.9 percent, according to MacKenzie.
Performance varied among the region’s submarkets. Office vacancy rates were highest in southwest Baltimore City (26.1 percent) and within the Central Business District (23.7 percent). Net absorption in the CBD for 2021 totaled -551,021 square feet. Several submarkets, however, posted gains last year. Eastern Baltimore County saw net absorption of 40,713 square feet and a vacancy rate of 12.7 percent, Carroll County had net absorption of 95,314 square feet and vacancy of 7.1 percent, and Columbia posted net absorption of 271,084 square feet and vacancy of 12.9 percent.