During the first half of 2018, five of the top ten metropolitan markets for commercial and multifamily construction starts ranked by dollar volume showed increased activity compared to a year ago, according to Dodge Data & Analytics. Of the top twenty markets, eleven were able to register gains. At the national level, the volume of commercial and multifamily construction starts during the first half of 2018 was $101.4 billion, down 1% from last year’s first half, although still 2% above what was reported during the first half of 2016.
The New York NY metropolitan area, at $16.1 billion during the first half of 2018, held onto its number one ranking and comprised 16% of the U.S. commercial and multifamily total, helped by a 44% jump compared to a year ago. During the previous two years, the New York NY share of the U.S. total had slipped to 14% in 2016 and 13% in 2017, after seeing its share reach a peak at 19% back in 2015. Other markets in the top ten showing growth during the first half of 2018 were Washington DC ($5.0 billion), up 23%; Miami FL ($4.9 billion), up 34%; Boston MA ($3.7 billion), up 56%; and Seattle WA ($3.2 billion), up 7%. Of these markets, the top four (New York, Washington DC, Miami, and Boston) showed renewed growth after the decreased activity reported for the full year 2017, while Seattle was able to maintain the upward track present last year. Metropolitan areas showing decreased activity for commercial and multifamily construction starts during the first half of 2018 were Dallas-Ft. Worth TX ($3.4 billion), down 23%; Los Angeles CA ($2.9 billion), down 38%; San Francisco CA ($2.8 billion), down 38%; Chicago IL ($2.7 billion), down 37%; and Atlanta GA ($2.0 billion), down 43%.
For those markets ranked 11 through 20, the six that registered first half 2018 gains were Austin TX ($1.8 billion), up 15%; Kansas City MO ($1.7 billion), up 52%; Orlando FL ($1.6 billion), up 4%; Phoenix AZ ($1.6 billion), up 19%; Minneapolis-St. Paul MN ($1.3 billion), up 34%; and Portland OR ($1.1 billion), up 15%. The four posting declines were Houston TX ($1.9 billion), down 13%; Philadelphia PA ($1.7 billion), down 13%; Denver CO ($1.6 billion), down 25%; and San Jose CA ($1.1 billion), down 37%.
The commercial and multifamily total is comprised of office buildings, stores, hotels, warehouses, commercial garages, and multifamily housing. At the U.S. level, the 1% drop for the commercial and multifamily total during the first half of 2018 reflected an 8% retreat for commercial building that was essentially balanced by an 8% increase for multifamily housing.
“Multifamily housing has proven to be surprisingly resilient so far during 2018, following its 8% decline in dollar terms at the U.S. level that was reported for the full year 2017,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “With apartment vacancy rates beginning to edge upward on a year-over-year basis, banks had been taking a more cautious stance towards lending for multifamily projects. Yet, after some loss of momentum during 2017, several factors appear to be providing near-term support for multifamily housing. The U.S. economy is currently moving at a healthy clip, with steady job growth bringing new workers into the labor force. The demand for multifamily housing by millennials remains
strong, given their desire to live in downtown areas while the increasing price of a single family home and diminished tax benefits may be dissuading some from making the transition to single family home ownership. As shown by this year’s surveys of bank lending officers conducted by the Federal Reserve, the extent of bank tightening for multifamily construction loans is not as widespread as a year ago.”
“On a broader level for commercial building, lending standards for nonresidential building loans have eased slightly over the past two quarters,” Murray continued. “And, the rollback of some of the Dodd-Frank restraints on the banking sector may encourage mid-size banks to increase lending for commercial real estate. While the expansion for commercial building and multifamily construction starts has clearly decelerated, the near-term shift appears to be one towards a plateau as opposed to a decline. This is consistent with the recent pattern for commercial and multifamily construction starts by major metropolitan areas, which reveals a fairly equal balance between those markets still showing gains and those markets showing decreased activity.”
Related Stories
Industry Research | May 22, 2023
2023 High Growth Study shares tips for finding success in uncertain times
Lee Frederiksen, Managing Partner, Hinge, reveals key takeaways from the firm's recent High Growth study.
Multifamily Housing | May 8, 2023
The average multifamily rent was $1,709 in April 2023, up for the second straight month
Despite economic headwinds, the multifamily housing market continues to demonstrate resilience, according to a new Yardi Matrix report.
Market Data | May 2, 2023
Nonresidential construction spending up 0.7% in March 2023 versus previous month
National nonresidential construction spending increased by 0.7% in March, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $997.1 billion for the month.
Hotel Facilities | May 2, 2023
U.S. hotel construction up 9% in the first quarter of 2023, led by Marriott and Hilton
In the latest United States Construction Pipeline Trend Report from Lodging Econometrics (LE), analysts report that construction pipeline projects in the U.S. continue to increase, standing at 5,545 projects/658,207 rooms at the close of Q1 2023. Up 9% by both projects and rooms year-over-year (YOY); project totals at Q1 ‘23 are just 338 projects, or 5.7%, behind the all-time high of 5,883 projects recorded in Q2 2008.
Market Data | May 1, 2023
AEC firm proposal activity rebounds in the first quarter of 2023: PSMJ report
Proposal activity for architecture, engineering and construction (A/E/C) firms increased significantly in the 1st Quarter of 2023, according to PSMJ’s Quarterly Market Forecast (QMF) survey. The predictive measure of the industry’s health rebounded to a net plus/minus index (NPMI) of 32.8 in the first three months of the year.
Industry Research | Apr 25, 2023
The commercial real estate sector shouldn’t panic (yet) about recent bank failures
A new Cushman & Wakefield report depicts a “well capitalized” banking industry that is responding assertively to isolated weaknesses, but is also tightening its lending.
Architects | Apr 21, 2023
Architecture billings improve slightly in March
Architecture firms reported a modest increase in March billings. This positive news was tempered by a slight decrease in new design contracts according to a new report released today from The American Institute of Architects (AIA). March was the first time since last September in which billings improved.
Contractors | Apr 19, 2023
Rising labor, material prices cost subcontractors $97 billion in unplanned expenses
Subcontractors continue to bear the brunt of rising input costs for materials and labor, according to a survey of nearly 900 commercial construction professionals.
Data Centers | Apr 14, 2023
JLL's data center outlook: Cloud computing, AI driving exponential growth for data center industry
According to JLL’s new Global Data Center Outlook, the mass adoption of cloud computing and artificial intelligence (AI) is driving exponential growth for the data center industry, with hyperscale and edge computing leading investor demand.
Healthcare Facilities | Apr 13, 2023
Healthcare construction costs for 2023
Data from Gordian breaks down the average cost per square foot for a three-story hospital across 10 U.S. cities.