Tech and energy may seem to get all the economic headlines, but they no longer are the only bright spots — a trend confirmed by recent data from the Bureau of Economic Analysis (BEA). The BEA’s data on economic output (GDP) by metro area indicated that financial services contributed the most to economic growth in 2013. This is noteworthy given that finance was one of the hardest hit industries during the recession. Professional and business services, the other primary driver of office space demand, also expanded at a solid pace in 2013, which is a positive sign for the U.S. office market. In fact, nearly every private employment sector expanded during the year, indicating how much the recovery has broadened. The government sector remains the only major weak spot amid continued federal cutbacks.
At the local level, more than three-quarters of U.S. metro areas posted GDP growth in 2013, and there were some surprises. Usual suspects such as Houston, Silicon Valley, Denver and Raleigh ranked among the top markets for growth, but they were joined by some of areas hardest-hit during the recession including the Inland Empire, Sacramento, Las Vegas, Miami-Fort Lauderdale-West Palm Beach and Tampa. Growth in these areas is coming from a range of industries including tourism, transportation and logistics, trade, finance and healthcare. Construction is also starting to come back slowly in these former housing bubble markets.
The broadening of economic growth to include more industries and areas is a positive sign for the U.S. real estate markets. No longer are just a handful of markets benefiting from the economic recovery, and this trend should continue in 2015. With little office space under construction in most cities, ongoing hiring by office users should drive additional occupancy gains and rent growth in more markets.
For more analysis on this topic, see Colliers’ Q2 2014 North American Office Report. For more data about GDP by metro area, see the full report from the Bureau of Economic Analysis.