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 percent of the U.S. commercial and multifamily total, helped by a 44 percent 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 percent in 2016 and 13 percent in 2017, after seeing its share reach a peak at 19 percent 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 percent; Miami FL ($4.9 billion), up 34 percent; Boston MA ($3.7 billion), up 56 percent; and Seattle WA ($3.2 billion), up seven percent
Of these markets, the top four 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 percent; Los Angeles CA ($2.9 billion), down 38 percent; San Francisco CA ($2.8 billion), down 38 percent; Chicago IL ($2.7 billion), down 37 percent; and Atlanta GA ($2.0 billion), down 43 percent.
The commercial and multifamily total is comprised of office buildings, stores, hotels, warehouses, commercial garages, and 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,” said 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.”