Some acronyms, like TPS reports (for Office Space fans), mean nothing but empty business jargon. Others, like IRS, cause a knee-jerk reaction of nervousness. Still yet are those, like GDP, that mean little until they're qualified by context. Besides standing for gross domestic product, it has a bit more meaning.
And in the case of Chicago, it's a pretty good thing, coming in with the third highest GDP in the country at $610 billion and growth of 1.8%. We've grown by 0.67% in professional and business services.
What's GDP got to do with real estate? Plenty, and at a macro level that affects us all. Increases in factors like GDP and job creation have a big impact on consumer confidence and home buyer demand.
Looking back this year, it's been strong GDP growth, continued employment recovery, and suburban companies relocating to the CBD that have helped shape the commercial real estate market for 2015.
Even since the end of 2014, we'd had the strongest GDP expansion in ten years, buoyed by high construction activity and low oil prices. That lead to an uptick in spending by resident consumers. When the manufacturing and construction sectors were polled in that period, however, they lagged behind their pre-recession peaks of 2008 by a combined 2.8 million jobs. Certainly, that number is improving with the construction boom we've experienced this year alone, with the CBD leading the way. Other areas though, like education, health services, professional and business services, and leisure and hospitality had added a net number of 5.7 million new payroll jobs. This JPMorgan Chase & Co. graph, which shows the Business Barometer Index of Chicago, reflects seven business activity indicators, such as production, new orders, order backlogs, inventories, employment, supplier deliveries, and prices paid. The reading is above 50, which means that our economy has been growing as of Q1 2014.
Interestingly, the markets that have grown the fastest, New York and Los Angeles, have been fueled by growth specifically in the real estate sector. And though Chicago isn't directly fueled by real estate, GDP as a confidence gauge will show in real estate transactions, which should show up in the next report.
·Visualizing the U.S. Growing (and Shrinking) Economies in a 3D Map [How Much]
·CREC/CCIM Event: Top Commercial Trends for 2015 [Chicago Association of Realtors]
·Realtor.com Makes Top 5 Housing Predictions for 2015, Reviews 2014 [Realtor.com]