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Q2 2021 GDP Details on Residential and Commercial Real Estate

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by Calculated Risk on 7/30/2021 11:41:00 AM

The BEA released the underlying details for the Q2 advance GDP report today.

The BEA reported that investment in non-residential structures decreased at a 7.0% annual pace in Q2. Note that weakness in non-residential structures started in 2019, before the pandemic.

Investment in petroleum and natural gas structures increased sharply in Q2 compared to Q1, and was up 46% year-over-year. However, investment in petroleum and natural gas structures is still down over 60% from the peak in 2014.

Click on graph for larger image.

The first graph shows investment in offices, malls and lodging as a percent of GDP.

Investment in offices (blue) decreased in Q2, and was down 9.0% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 19% year-over-year in Q2 – and at a record low as a percent of GDP. The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment increased slightly in Q2 compared to Q1, but lodging investment was down 19% year-over-year.

All three sectors – offices, malls, and hotels – are being hurt significantly by the pandemic.


The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Even though investment in single family structures has increased from the bottom, single family investment is just approaching normal levels as a percent of GDP.

Investment in single family structures was $405 billion (SAAR) (about 1.8% of GDP), and up 45% year-over-year.

Investment in multi-family structures increased in Q2.

Investment in home improvement was at a $331 billion Seasonally Adjusted Annual Rate (SAAR) in Q2 (about 1.5% of GDP). Home improvement spending has been strong during the pandemic.

Note that Brokers’ commissions (black) increased sharply last year as existing home sales increased in the second half of 2020, but was down in Q2. Brokers’ commissions were up 49% year-over-year in Q2.

Black Knight: Number of Homeowners in COVID-19-Related Forbearance Plans Increased Slightly

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