Q4 2020 GDP Details on Residential and Commercial Real Estate

The BEA has released the underlying details for the Q4 advance GDP report.

The BEA reported that investment in non-residential structures increased at a 3.0% annual pace in Q4. This followed four consecutive quarterly declines (weakness started before the pandemic).  On an annual basis, investment in non-residential structures was off 9.5% in 2020 from 2019.

Investment in petroleum and natural gas structures increased sharply in Q4 compared to Q3, but was still down 37% year-over-year.  On an annual basis, investment in petroleum and natural gas structures was off 39% in 2020 compared to 2019.

Office Investment as Percent of GDPClick on graph for larger image.

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

Investment in offices decreased in Q4, and was only 6.1% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 19% year-over-year in Q4 – 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 decreased in Q4, and lodging investment was down 23% year-over-year.

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

Residential Investment ComponentsThe 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 still low, and still below the bottom for previous recessions as a percent of GDP.

Investment in single family structures was $337 billion (SAAR) (about 1.6% of GDP), and up 16.2% year-over-year.

Investment in multi-family structures increased in Q4.

Investment in home improvement was at a $306 billion Seasonally Adjusted Annual Rate (SAAR) in Q3 (about 1.4% of GDP).  Home improvement spending has been solid during the pandemic.

Note that Brokers’ commissions (black) increased sharply as existing home sales increased in the second half of 2020, and was up 32% year-over-year in Q4.