The Link Between Infrastructure Investment and Commercial Property

By Gary Tasman

The ink is now dry on the $1.2 trillion federal Infrastructure Investment and Jobs Act (IIJA). The bipartisan bill represents the most momentous investment in U.S. infrastructure in more than 50 years, not only reauthorizing $650 billion in already appropriated funding, but also designating an additional $550 billion for new infrastructure projects. These include improvements to transportation infrastructure such as highways, bridges, public transit, ports and airports. The increased funding also supports efforts to shore up the nation’s electric grid, broadband, and water infrastructure.

Infrastructure reform is good news for business and the economy as a whole. The ability to transport goods and services—as well as employees—from one location to another is a key component of business efficiency. Improvements to infrastructure not only bolster productivity and reduce production costs, they also create jobs, both short-term and long-term. Infrastructure investment also has a significant impact on commercial real estate.

Here in Southwest Florida, the path to commercial and residential development typically follows infrastructure investments. As our region has matured and expanded, the trick to finding the next hot market has been to follow the municipal planning process, in particular transportation and utility improvements.

Infrastructure and Growth in Southwest Florida

Examples can be seen across Southwest Florida. In just two decades, Collier Boulevard in Naples has developed from a rural two-lane road to a bustling six-lane divided highway. With the improvements to transportation infrastructure and accompanying utilities expansion, Collier Boulevard is now a bustling commercial and residential corridor with gated communities, large shopping centers, and a 100-bed acute care hospital—and the area is still growing.

In Lee County, we’ve seen similar growth just east of Interstate 75. Only a little more than a decade ago, Southwest Florida International Airport and Florida Gulf Coast University were outliers, with little other development along Treeline Avenue and Ben Hill Griffin Parkway. Today, tourists flying into RSW or alumni returning to FGCU for a visit after a long absence may not even recognize the area.

Further north, we can expect to see similar infrastructure-fueled growth along Burnt Store Road between Cape Coral and Punta Gorda, where utilities expansion and road-widening projects will foster more residential and commercial growth. Additionally, investments to the Punta Gorda Airport are sparking similar progress in Charlotte County.

The Big Picture: Infrastructure and Commercial Real Estate

Although the final destination of the IIJA funds has yet to be determined, we can expect heavily-populated states like Florida, California, Texas and New York to receive the greatest amount of funding from the IIJA.

According to Rebecca Rockey, Cushman & Wakefield Head of Economic Analysis & Forecasting, the most obvious CRE beneficiary of infrastructure improvement is industrial real estate, because “…nearly all goods that U.S. consumers purchase weave their way through a domestic maze of transportation and warehousing.” However, Rockey points out that the true impact oncommercial property is through the indirect effects of infrastructure investment on the economy, output, and productivity.

The ROI of infrastructure investment can be impressive. Over ten years, each million-dollar increase in public infrastructure investment is expected to yield nearly $700,000 of additional Gross Domestic Product. Moody’s Analytics estimates that the GDP could grow by 3.5%, or $758 billion of output, over the next 10 years.

As a result, Cushman & Wakefield analysts expect to see total demand for all commercial real estate sectors (office, industrial, retail, and multi-family residential) to climb by about 1.2% across the nation. In an already hot commercial property market like Southwest Florida, this number could be even higher.

How will the IIJA influence your commercial property investment strategy? The Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida have the knowledge and experience to help guide your decision-making process. Call our team at 239-489-3600 or contact-us.

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