Quantifying Commercial Real Estate’s Economic Impact
By Carolyn Lane
Few would dispute that the commercial real estate sector is important to Canada’s economy, but now for the first time the numbers exist to prove it. And they are impressive.
In 2011 alone, the sector generated $63.3 billion in annual economic activity - more than twice that of the province of Newfoundland & Labrador. A recently released research report from the Real Property Association of Canada (REALpac) and the NAIOP Research Foundation quantifies the size, scope and economic contribution of the sector, both nationally and provincially and across sub-sectors.
The aptly titled The Contribution of the Commercial Real Estate Sector to the Canadian Economy, written by Altus Group Economic Consulting, offers bottom-line perspective that provides reinforcing muscle to REALpac’s government relations efforts and other initiatives. The industry’s influence is demonstrated in its 2011 performance when it was backed by some $21.6 billion in capital investment, about $14.9 billion was spent on new buildings, and $6.7 billion was poured into capital improvements, renovations and the upgrading of existing buildings.
“This shows the continuing confidence that sector leaders have in Canada’s long-term economic prospects,” says Paul Morse, CEO of REALpac. “Where our members and other industry professionals build and invest in properties, they build and invest in the future of our country. In Canada, we are very prudent about commercial development and so when you see activity, that’s a vote for our future.”
Among other findings, the report shows that the sector:
The research report marks the first time reliable analytics on the industry’s contribution have been made available, which should support development and investment initiatives, and provide leverage for REALpac government relations activities. The association’s advocacy efforts target such federal and provincial issues as property tax, infrastructure development, Real Estate Investment Trust (REIT) regulations, sustainable development and real estate statutes.
- Supports 340,000 jobs, many of which are high-paying professional positions. This is roughly equivalent to the total employment of the entire Canadian agriculture industry;
- Generates $18.1 billion in personal income, which is more than twice the amount generated by the Canadian agriculture, forestry and fishing industries combined;
- Generates $12.5 billion in corporate profits earned by many small and medium companies, as well as some of the largest pension funds and insurance companies in Canada;
- Contributes $7.2 billion in personal and corporate income tax revenues for the federal and provincial governments;
- Contributes $32.4 billion annually to Canada’s GDP – more than the total GDP of New Brunswick;
- Cenerated $3.5 billion in building management fees and almost the same amount for commercial brokerage fees from sales of commercial properties in 2011.
REALpac defines the commercial real estate sector as “building and operating private industrial, office and retail/entertainment buildings.” Government-owned buildings or institutional facilities are not included. For the REALpac/NAIOP Research report, research was conducted on following asset types:
As well, companies and professionals in the sector deliver a range of professional services, including:
- Industrial: A wide range of property types including manufacturing facilities, warehouses and distribution centres.
- Office: Downtown office towers, suburban offices, corporate campuses and other office buildings owned by the private sector.
- Retail and Entertainment: Shopping centres, theatres, performance arts and cultural centres, restaurants and bars, and automotive dealerships.
“Across all sub sectors – office, industrial, retail and multi-family, seniors housing and hotel – the performance of commercial real estate acts as an indicator of our country’s economic health and outlook,” Morse maintains. “Sector leaders play an active role in creating the conditions that generate economic growth and jobs so their voices are always worth listening to.”
- Building Management: Providing services in planning and managing CRE buildings, and ensuring services, such as security, health and safety, and maintenance of the building meet a satisfactory level. Building managers also collect rents and search new tenants on behalf of building owners.
- Commercial Brokerage Services: Providing a connection and facilitating a full range of transactions between buyers and sellers, and owners and occupiers, of all types of commercial properties on local and global levels.
In addition to providing high-quality spaces in which millions of Canadians live, work and play, the commercial real estate sector itself is a major employer, another fact highlighted by the report. It shows the provincial breakdown of labour/personal income generated by the sector in 2011, with Ontario in the lead at $7.3 billion, followed by Alberta at $3.8 billion, Quebec at $3.4 billion and British Columbia at $1.8 billion.
“Commercial real estate stands at the centre of our thriving cities. It defines our skylines, much of our environmental footprint, creates jobs, spurs economic growth and helps business find new efficiencies in our rapidly evolving world,” Morse observes. “This report is another step to ensuring the industry’s tremendous contribution is not underestimated, and in fact encouraged.”
Carolyn Lane is Vice President, Membership, Marketing & Communications with the Real Property Association of Canada (REALpac).The complete text of The Contribution of the Commercial Real Estate Sector to the Canadian Economy can be found on REALpac’s web site at www.realpac.ca.