Estimating the Economic Impact of Commercial Real Estate OVERVIEW

Economic Impact How is it measured? What is included?

How is it measured?

What is included?

How is economic impact measured? Total Output - value produced by the final demand dollars cycling through the economy. Total Earnings - the amount of total output paid in compensation. Total Employment -the number of jobs created or sustained.

Total Output - value produced by the final demand dollars cycling through the economy.

Total Earnings - the amount of total output paid in compensation.

Total Employment -the number of jobs created or sustained.

What is included? Direct Impact Indirect Impact Induced Impact – Effects of households .

Direct Impact

Indirect Impact

Induced Impact – Effects of households

.

Three Rivers Model What inputs are needed? How does it work?

What inputs are needed?

How does it work?

What inputs are needed? RIMS II Multipliers Building Size Cost per square foot Building occupancy (total or per square foot)

RIMS II Multipliers

Building Size

Cost per square foot

Building occupancy (total or per square foot)

How does it work? Step 1: Define Region and Order RIMS II Data Step 2: Calculate Final Demand Step 3: Apply Multipliers

Step 1: Define Region and Order RIMS II Data

Step 2: Calculate Final Demand

Step 3: Apply Multipliers

Step 1: Define Region and Order RIMS II Data Define geographic scope County up to Country level Select data series Annual Benchmark Choose data type Type I Type II http://www.bea.gov/regional/rims/

Define geographic scope

County up to Country level

Select data series

Annual

Benchmark

Choose data type

Type I

Type II

http://www.bea.gov/regional/rims/

Step 2: Calculate Final Demand Construction Phase Building Size X Cost per sf Final Demand Business Operations Phase Direct Employment Multiplier ÷ Total Employment Multiplier Calculated Multiplier X $1,000,000 Final Demand per Employee X # of Employees Final Demand

Construction Phase

Building Size

X Cost per sf

Final Demand

Business Operations Phase

Direct Employment Multiplier

÷ Total Employment Multiplier

Calculated Multiplier

X $1,000,000

Final Demand per Employee

X # of Employees

Final Demand

Step 3: Apply Multipliers Step 1 Step 2 Step 3 Total Employment Multiplier/1Million Total Earnings Multiplier Total Output Multiplier Final Demand

Case Study – Construction Final Demand: 100,000 sf x $150 per sf = $15 Million Step 1 Step 2 Step 3 19.3875/1,000,000 0.7593 2.3339 $15,000,000

Final Demand: 100,000 sf x $150 per sf = $15 Million

Case Study – Business Operations Final Demand: 2.1554/17.6334 x $1,000,000 x 400 = $48 Million Step 1 Step 2 Step 3 17.6334/1,000,000 0.7903 2.0506 $48,893,600

Final Demand: 2.1554/17.6334 x $1,000,000 x 400 = $48 Million

Advanced Application Multipliers can be disaggregated Total value added can be observed Properties can be allocated for different uses Sales and employment taxes can be estimated Apply it to several projects simultaneously Building operations can be considered

Multipliers can be disaggregated

Total value added can be observed

Properties can be allocated for different uses

Sales and employment taxes can be estimated

Apply it to several projects simultaneously

Building operations can be considered

Conclusion Quantifying the economic impact of commercial real estate development is often ambiguous. The Three Rivers Model is a fairly simple way of measuring gross economic impacts. It is based in RIMS II data that is highly regarded, easily obtained, and inexpensively purchased.

Quantifying the economic impact of commercial real estate development is often ambiguous.

The Three Rivers Model is a fairly simple way of measuring gross economic impacts.

It is based in RIMS II data that is highly regarded, easily obtained, and inexpensively purchased.

Publication Web Address: http://www.ciremagazine.com/article.php?article_id=1330

Contact Information Ryan Stokes Consultant Constellation Real Estate Services 4221 Sherrod Street Pittsburgh, PA 15201 Phone: 412-512-1864 E-mail: [email_address]

Ryan Stokes

Consultant

Constellation Real Estate Services

4221 Sherrod Street

Pittsburgh, PA 15201

Phone: 412-512-1864

E-mail: [email_address]