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Federal Uncertainty Clouds Development and Recovery

By Paul Bubny for Globe Street

Original headline: NAIOP: Gov’t Uncertainty Clouds Development

CRE quoteCRE development generated $303.4B of economic activity in 2012, up nearly 16 percent from 2011’s tally of $261.6B in 2011, while adding 307.5MSF to the nationwide total, up 29 percent from the new space built in the prior year. Yet governmental uncertainty threatens such double-digit gains from being achieved again in the next few years, the NAIOP Research Foundation says in a report published October 7. exclusively obtained the report prior to its publication.

NAIOP’s report makes it clear that the nation can’t have the one (construction sector recovery) without the other (economic recovery)—and vice versa. “The strength of the US economy’s recovery is directly linked to the pace of recovery experienced by the construction sector, both residential and nonresidential,” writes the report’s author, Dr. Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University. “As construction expenditures move toward normal levels between 2013 and 2015, the US economy’s growth rate is projected to increase from 2.2 percent in 2012 to 3.5 percent in 2015.”

Last year, Fuller notes, “broad-based gains in residential and nonresidential building construction in ’12 contributed to the national economy’s stronger performance in 2012 compared to ’11.”

“With projections that both residential and nonresidential (commercial, health care, and manufacturing and warehousing) construction expenditures will accelerate in 2013, 2014 and 2015, the US economy will experience stronger growth once it digests this year’s increase in federal taxes and decrease in federal spending,” writes Fuller.

Going forward, “the US economy cannot achieve a sustained expansion in the absence of the construction industry’s full recovery,” Fuller writes. The recovery is currently projected to continue to at least 2018.

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