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How Construction Activity Affects Commercial Real Estate Services Firms

Construction can generate project and leasing assignments for commercial real estate services firms, but completed space can also increase competition. The effect depends on local demand, property type, costs and project timing.
From TheFinanceBase Team8 min to read
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Construction affects commercial real estate (CRE) services firms in two directions: projects can create advisory, brokerage, leasing and management assignments, while the finished buildings add supply that may intensify competition for tenants. The net effect depends on local demand, project costs and financing, property type, preleasing and the amount of competing space—not on construction volume alone. Current U.S. industry outlooks describe market conditions, but do not quantify construction’s causal effect on service firms’ revenue.

How does construction activity affect commercial real estate services firms?

Construction changes both the work available to CRE services firms and the property market in which they operate. A project can require advice and transaction support before a building exists, create leasing work as it nears completion, and lead to management assignments after delivery. At the same time, each completed building adds space to its market. If tenant demand does not absorb that space, owners may face more vacancy, greater pressure to compete on terms or amenities, and a longer lease-up period.

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That is why “more construction” is not automatically good or bad for a services business. The same project may generate near-term work for advisers and brokers while making it harder to lease existing properties nearby later. Conversely, fewer starts can reduce development-related assignments but may help existing buildings if occupier demand remains healthy and limited new supply supports leasing conditions. The outcome depends on which service lines a firm has, when the work occurs, and whether supply is being matched by demand.

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Construction activity should therefore be read alongside local leasing, vacancy, rents, preleasing, development and financing costs, and the relevant property sector. NAIOP’s economic-impact research provides context for the construction and operations of commercial real estate, while CBRE’s 2026 outlook describes different supply and leasing conditions by sector; neither establishes a direct revenue multiplier for CRE services firms. NAIOP’s 2026 research; CBRE’s 2026 outlook.

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Which services can gain work, and when?

A development moves through stages: planning and financing, construction, delivery and lease-up, then ongoing operation. Different services firms may encounter opportunity at different points. The sequence below describes the market mechanism; the available industry research does not quantify the fee or revenue generated at each stage.

Project stage Potentially exposed services What to watch
Planning and development Development advisory and investment services Whether projects proceed, financing and construction costs, and the project’s location and property type.
Construction and pre-leasing Leasing teams and brokerage How much space is preleased and whether expected occupier demand supports the proposed building.
Delivery and lease-up Leasing teams, brokers and valuation professionals Completed competing space, leasing activity, vacancy and rent trends.
Ongoing operation Property managers and investment services Whether a building is occupied and operating, and the continuing needs of its owner and tenants.

Timing matters. A construction start does not mean a building is immediately available to tenants or producing recurring management work. The time between a start, completion, lease-up and ongoing operations can separate a project-related assignment from later work. Delays can stretch that interval; a completed but slowly leasing building can add supply without quickly producing stable occupancy-related work. For this reason, firms and market observers should distinguish projects under construction from completed deliveries rather than treating both as current available space.

A slowdown can affect these stages unevenly. Fewer projects may mean fewer development assignments or future leasing campaigns, but a smaller delivery pipeline may also reduce future competition for existing buildings. Whether the second effect helps depends on demand: restrained new supply cannot by itself guarantee stronger leasing if occupiers are not taking space.

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Why do property type and location change the result?

A national construction total can hide sharply different local conditions. A market may have a tight supply of one kind of space and an excess of another; even within a sector, buildings differ by location, age and quality. Service firms need to connect construction to the inventory and tenant demand relevant to their own assignments, rather than infer local prospects from an aggregate figure.

Property type Construction-related consideration Implication for service firms
Office CBRE describes differences between prime and secondary assets, with leasing recovery varying by market. Restrained construction of prime space can contribute to scarcity in higher-quality stock, while weaker properties may face competition and repositioning needs. Separate quality tiers and local leasing conditions; an office-market average can conceal both relative scarcity and buildings that need repositioning.
Industrial and logistics New supply must be considered with demand, manufacturing and logistics activity, asset quality and local absorption. Colliers describes a construction pullback alongside demand in logistics, manufacturing, data centers and research and development. Track local inventory and absorption rather than treating fewer starts as proof of either shortage or a stronger service market.
Retail Disciplined development and tenant demand can keep supply tight; deliveries in weaker locations can instead increase leasing pressure. Assess the location and tenant demand behind each pipeline, rather than generalizing from retail construction nationally.
Data centers Strong demand does not ensure rapid delivery. Power availability, construction delays and supply constraints can prolong project pipelines and shift advisory and leasing schedules. Distinguish demand for space from space that can actually be delivered on the expected schedule.
Healthcare and other specialized assets Completions and demand can move independently of general office construction; CBRE’s 2026 outlook notes a drop in healthcare completions. Use asset-specific and local pipeline information rather than using office construction as a proxy.

These differences appear in recent industry outlooks, not as universal rules for every market. See CBRE’s 2026 outlook, Colliers’ 2026 outlook, and CBRE’s 2025 midyear review for the sector perspectives summarized here.

How do costs, financing and project delays affect the pipeline?

Not every proposed project becomes a completed building. Construction costs and financing conditions influence whether a development proceeds and when; policy and cost uncertainty can also affect development decisions. JLL’s 2026 U.S. construction perspective discusses those pressures, but the available material does not establish a single cost threshold at which projects stop being viable. JLL’s 2026 construction perspective.

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For services firms, this creates a difference between the announced pipeline and realized work. A project that is delayed, redesigned or not advanced may postpone or remove prospective assignments. A delay can also push back leasing and management activity tied to delivery. Conversely, when cost or financing pressure curbs new development, the resulting limits on future supply may matter to existing properties later. The effect is not immediate, and whether it offsets lost project work depends on local tenant demand and competing inventory.

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Use starts, projects under construction and completed deliveries as distinct measures. Starts indicate activity at an early point; under-construction projects show a pipeline that may still face delays; completions add delivered space. Preleasing helps indicate whether some of that future space already has tenants, but it does not replace monitoring actual deliveries and leasing conditions.

What do the economic-impact figures say—and not say?

The NAIOP Research Foundation’s 2025 U.S. edition reports the combined contributions of new commercial building development and existing building operations in 2024. It estimates $898.5 billion in direct expenditures, $2.5 trillion contributed to U.S. GDP, $862.5 billion in personal earnings and 14.2 million jobs supported. Those figures describe the combined economic footprint, not the incremental impact of construction on CRE brokerage, management, valuation or advisory firms.

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The report also estimates $2.95 in total economic value per $1 of construction spending, reflecting cumulative effects as initial expenditures cycle through the economy. That is a broad economy-wide multiplier, not a return earned by a construction company and not a revenue multiplier for a CRE services firm. It should not be used to forecast a services firm’s fees, headcount or profitability. NAIOP Research Foundation’s 2025 report.

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How should you read construction forecasts?

Forecasts are dated expectations, not evidence that a projected outcome occurred. The American Institute of Architects’ January 17, 2025 consensus forecast said nonresidential building construction spending was projected to slow after increases in 2023 and 2024. It projected gains of 2.2% in 2025 and 2.6% in 2026 for nonresidential building construction spending overall; for commercial spending, it projected 1.7% in 2025 and 4.2% in 2026; for industrial spending, 2.6% in 2025 followed by a 2.5% decline in 2026. These are the forecast’s projections, not verified results or current observations. AIA’s January 2025 consensus forecast.

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Later outlooks also have scope and date limits. CBRE’s August 4, 2026 midyear release characterizes construction as restrained in most sectors while identifying technology expansion, reshoring, consumer spending and demographic demand as support for selected segments. This is CBRE’s outlook, not a statement that all U.S. sectors or markets share the same conditions. CBRE’s August 2026 midyear release. Compare such forecasts with realized local starts, completions, vacancy, rents and leasing activity before drawing conclusions about a particular firm or market.

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What should a reader monitor in a CRE market?

To assess how construction may affect a services firm, work from the market and service line outward. A short checklist is more useful than a single headline construction number:

  • Property sector and local market: Define the geography and asset type relevant to the firm’s work.
  • Pipeline stage: Separate planned or announced projects, starts, projects under construction and completed deliveries.
  • Preleasing: Check how much future space has tenants before completion, where that information is available.
  • Occupier demand and leasing activity: Determine whether tenants are taking space in the relevant market and segment.
  • Vacancy and rents: Read both together with deliveries; supply can affect the competition owners face, but demand also shapes outcomes.
  • Building quality and age: Compare like with like, especially where prime and secondary assets face different conditions.
  • Costs, financing and delays: Consider whether projects are likely to proceed on schedule, not just whether they have been proposed.
  • Service-line exposure and timing: Identify whether the firm earns work from development advice, brokerage, leasing, management, valuation or investment services, and allow for the lag from start to delivery, lease-up and operation.

This framework avoids a common analytical error: treating a rise or fall in construction as a direct proxy for a service firm’s performance. The chain runs through whether projects proceed, what space they deliver, how much of it is absorbed, and which services the firm provides at each stage.

What can construction data establish about a services firm?

Construction and market outlooks can explain plausible channels of impact: development creates project needs, deliveries alter inventory, and tenant demand and costs affect whether space is absorbed and projects advance. They cannot, without company-level evidence, establish how much revenue, profit or staffing a particular brokerage, manager or adviser will gain or lose. The reviewed U.S. sources do not directly quantify a causal revenue impact on CRE services firms. Firm-level results also depend on the mix of clients, markets and services, information not captured by a construction total.

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Accordingly, use construction as one part of a market assessment. Pair it with local demand, financing and development costs, preleasing, vacancy, rent trends and property type, then consider the firm’s particular service exposure and timing. That yields a more defensible reading than assuming that either a building boom or a construction slowdown automatically helps every CRE services business.

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