The Bureau of Economic Analysis (BEA) released its second quarter advance GDP report, fund inflows into office space segment (commercial construction) is on recovery path, but still showing pressure as it hovering about 33% lower than the recent peak level in terms of GDP percentage.
The non-residential construction segment recorded a drop in investment. The declining investment in the petroleum sector is the major reason for easing the funds inflow into the non-residential segment.
The sustained development in the US economy is creating more demand for office space. This is further pushing the rentals upwards, according to a report made by Jones Lang LaSalle (JLL).
Office space construction, however, was slower in the first quarter, but it rebounded in the next quarter. The main reason for this growth was the revival of the business activity in the US market.
The funds inflow into petroleum and natural gas exploration segment dropped to $81.1billion in the second quarter from $112.5billion during the first quarter.
However, barring the petroleum segment, the non-residential sector witnessed a growth of 6.8% in investment during the second quarter.
On the other side, investments in malls construction (multi-merchandise shopping structures) have dropped by about 54%. Most of the commercial space in the malls has been lying idle and as a result, investors are not coming forward to park their money in malls construction. This situation is likely to continue for some more time.
A vibrant hospitality sector is registering an encouraging growth as occupancy levels are at record level during the second quarter. The growing business of hotels is attracting more fresh investment into the hospitality segment.
However, the investment in the lodging segment dipped 57% from its peak level during the third quarter in 2008, when it accounted for 0.31% of GDP.
Among the residential investment segment investments, single family structures were the prime attraction for fresh investment. Working couples prefer to upgrade their homes and perhaps this is pushing the home improvement investment on the top slot for the last 20 quarters consecutively.
For the last seven quarters, single family structures segment has been on the top slot in terms of fresh investment. BEA forecasts that this trend would continue in the near future as well.
BEA's residential investment (RI) definition includes new single-family and multifamily structures, home improvement, brokers' commissions and other ownership transfer costs. Dormitories and manufactured homes are also included in the residential investment concept.
The investment in the single family structures has hit the bottom as a percent of GDP during the earlier recessions. The investment in this segment is increasing gradually. This is likely to continue for next few years as per the prediction made by BEA.
The single family structures segment attracted $210billion investment accounting for 1.2% of GDP on seasonally adjusted annual rate (SAAR) basis during the first quarter.
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