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  • January 2017: Construction workers erecting a building in the 1300 block of Rusk Street, downtown Houston.

Construction Spending Reaches Pre-Recession Level, Texas Ranks 2nd in Nation

Direct expenditures in the construction industry matched a level in 2016 that has not been seen since 2007, and Texas was second in spend only to New York.

The total economic contribution of that spending to the national Gross Domestic Product, based on a multiplier effect, represented 18.3 percent of GDP, according to a survey prepared for the Commercial Real Estate Association. Also known at the National Association for Industrial and Office Parks (NAIOP), the association produces the annual survey through its NAIOP Research Foundation.

Results released earlier this week reveal that direct expenditures reached $1.16 trillion in 2016, matching the $1.16 trillion level achieved in 2007. For 2016, the total economic contribution (classified as Total Output in the survey) came to almost $3.4 trillion.

Based on a ranking of Total Output (with a multiplier effect), New York ranked first with more than $46 billion; Texas ranked second with about $44.4 billion; and California ranked third with $30.8 billion.

Looking only at commercial spending (office, industrial, warehouse, and retail/entertainment), the survey also divided spending into Soft Costs (pre-construction), Site Development, and Hard Costs. Direct spending for the state of Texas in these categories was as follows:

  • Soft Costs: $2.895 billion
  • Site Development: $2.488 billion
  • Hard Costs: $18.504

The Total Output for Texas in these same categories was:

  • Soft Costs: $6.958 billion
  • Site Development: $5.967 billion
  • Hard Costs: $23.0484 billion

The Total Output of new construction was almost $36 billion. The survey also looked at construction costs related to the maintenance operations of existing buildings, which is how the total for Texas reached $44.4 billion.

The state rankings for Total Output did not always correlate evenly across all variables. Differences in the share of construction by commercial sector, labor costs and other factors affected the rankings of direct expenditures and jobs supported.

For example, while Texas ranked second in Total Output, the state ranked first in jobs supported with 310,994 workers. Similarly, North Carolina ranked ninth in jobs supported, but it was 11th in Total Output. Virginia was 12th in direct expenditures, but it was 14th in Total Output.

Refering to the nation, the survey said that when combining the economic contributions of new development with the economic contributions from operations of existing buildings in 2016, direct expenditures of $310.1 billion resulted in the following economic contributions to the U. S. economy:

  • Contributed $861.0 billion to U.S. GDP
  • Generated $264.4 billion in personal earnings
  • Supported a total of 6.25 million jobs

The NAIOP survey also made forecasts about Residential, Nonresidential, Employment, and the construction sector’s effect on the U.S. economy.


Multifamily housing construction has increased its share of residential construction spending during the recovery and is expected to retain a larger share of residential construction spending even after single-family housing construction
increases towards its equilibrium level of 1.5 million units annually by 2020.

Current forecasts by IHS Economics (December 2016) indicate that residential construction spending is projected
to increase 2.7 percent in 2017 after increasing an estimated 4.7 percent in 2016.

Single- and multifamily housing starts in 2016 are estimated to have totaled 1.174 million units, a gain of 6.0 percent from 2015. Starts are projected to increase each of the next five years, with 1.231 million starts expected in 2017. By
2021, starts are projected to reach 1.5 million units. Still, just a year ago, 1.5 million starts had been expected in 2018. This underscores the slower-than-anticipated pace of growth in residential construction, dating back to the early
years of the recovery.


Nonresidential construction expenditures turned positive in 2011, increased each year since, and have now gained a total of 30.6 percent through October 2016. Forecasts for 2017 confirm an uneven pattern of investment across the broad range of building types.

Construction spending for manufacturing structures increased steadily over the 2011 to 2015 period (up 92.8 percent), with fixed investment in manufacturing up 30.8 percent in 2015. In contrast to this high rate of increase, fixed investment in manufacturing structures is estimated to have decreased 4.3 percent in 2016 and to have decreased by 4.5 percent in 2017. Longer-term projections for manufacturing investment show it continuing to decline slightly in 2018 and 2019 and then turning positive in 2020.

Construction spending for office buildings was up sharply in 2016 (24.8 percent through October 2016 ) and is projected to continue to grow in 2017.

The value of retail construction put in place in 2016 was also up from 2015, increasing 6.8 percent between October 2015 and October 2016. However, the outlook for continued growth of retail construction is for slower gains over the remainder of the decade.

Construction spending for warehouse and flex space increased steadily between 2011 and 2016, but is estimated to have declined by 8.9 percent in 2016, based on the value of construction put in place.

Construction Employment

Construction employment, which declined by 2.3 million jobs between 2006 and 2010, began to add new jobs in early 2011, according to the Bureau of Labor Statistics. Construction employment now has increased for a sixth year.

Between November 2015 and November 2016, the construction sector added 155,000 net new jobs. From the low point in January 2011 through November 2016, a total of 1.3 million net new construction jobs were generated. Still,
employment in the construction sector remained 985,000 jobs below its peak in March 2006.

U.S. Economy

The ongoing recovery in construction activity has been the one consistently positive force in the national economy’s performance since 2009 and it is expected to continue to strengthen.

Over the next four years, the construction sector is projected to grow (by value) at annual rates ranging between 2.3 percent and 6.1 percent.

This continuing expansion will support GDP gains during this same period ranging from 2.1 to 2.6 percent, according to IHS Economics (December 2016 forecast).

The survey was based on NAIOP member responses to questionaires that were emailed during the month of February 2016. Participants were mainly commercial real estate developers and owners involved in the construction of office, warehouse, manufacturing and retail buildings. The response rate was 6.31 percent out of 1,949 members throughout the United States.


Edited by Adolfo Pesquera from the 2016 NAIOP Economic Impacts of Commercial Real Estate survey.

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By |2018-04-22T12:47:48-05:00April 13th, 2017|Industry News|

About the Author:

Adolfo Pesquera (Reporter/Editor) is a veteran news journalist. He has worked for Hearst Corp., American Lawyer Media, News Corp and Freedom Communications. His work has been published in newspapers and magazines across the USA. He is a journalism graduate of UT-RGV. He writes, edits and creates digital pages for VBX.