NEW YORK (August 3, 2017) – During the first half of 2017, eight of the top ten metropolitan markets for commercial and multifamily construction starts ranked by dollar volume registered decreased activity compared to a year ago, according to Dodge Data & Analytics. At the same time, metropolitan markets ranked 11 through 20 showed growth for nine of the ten markets, as smaller geographic areas are picking up the slack from the deceleration underway in those cities that have led the commercial and multifamily upturn over the past several years. At the national level, the volume of commercial and multifamily construction starts during the first half of 2017 was $87.5 billion, down 9 percent from last year’s first half, although still a slight 1 percent above what was reported during the first half of 2015.
The New York NY metropolitan area, at $10.5 billion in the first half of 2017, maintained its number one ranking and comprised 12 percent of the U.S. commercial and multifamily total, but was down 22 percent from a year ago. The New York NY metropolitan area reached a peak back in 2015, when $35.3 billion in commercial and multifamily construction starts were reported for the full year, comprising 17 percent of the national total. In 2016, New York NY dropped 16 percent for the full year, and now is on track for another decline in 2017. Other metropolitan areas in the top ten with double-digit declines in the first half of 2017 were Los Angeles CA ($4.4 billion), down 15 percent; Dallas-Ft. Worth TX ($3.2 billion), down 29 percent; Boston MA ($2.4 billion), down 27 percent; and Seattle WA ($1.9 billion), down 23 percent. Miami FL ($3.6 billion) dropped a moderate 5 percent during the first half of 2017, and the two markets in the top ten with only slight declines were Chicago IL ($3.8 billion) and Washington DC ($3.6 billion), each down 1 percent. The two metropolitan areas in the top ten that showed growth during the first half of 2017 were San Francisco CA ($4.5 billion), up 48 percent; and Atlanta GA ($3.4 billion), up 19 percent. San Francisco was lifted by the start of the $1.3 billion Oceanwide Center Tower, while Atlanta benefitted from the start of the $240 million Coda Building in Georgia Tech’s Technology Square.
For those markets ranked 11 through 20 in the first half of 2017, the only decline was reported for Denver CO ($1.8 billion), down 16 percent from a year ago. The remaining nine markets, listed in order by the volume of activity, were the following – Houston TX ($1.8 billion), up 2 percent; Philadelphia PA ($1.7 billion), up 23 percent; San Jose CA ($1.6 billion), up 49 percent; Austin TX ($1.5 billion), up 14 percent; Baltimore MD ($1.4 billion), up 46 percent; Charlotte NC ($1.4 billion), up 58 percent; Orlando FL ($1.4 billion), up 28 percent; Sacramento CA ($1.1 billion), up 659 percent; and San Antonio TX ($1.0 billion), up 5 percent. The huge percentage increase for Sacramento CA reflected the start of the $600 million McClellan Business Park Data Center as well as the comparison to a particularly low amount during the first half of 2016 (when Sacramento ranked 81 of metropolitan areas by dollar volume instead of this year’s first half ranking at 19).
The commercial and multifamily total is comprised of office buildings, stores, hotels, warehouses, commercial garages, and multifamily housing. At the U.S. level, the 9 percent decline for the commercial and multifamily total during the first half of 2017 was due entirely to a slower pace for multifamily housing, which dropped 18 percent, while commercial building held steady with its first half 2016 amount.
“Multifamily housing served as the leading edge of the current construction expansion, and increasingly it looks like it reached its peak in 2016,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. Much of the early multifamily growth reflected an exceptional amount of activity taking place in the New York NY metropolitan area, boosted by developers trying to get projects started prior to the expiration of the 421-a program in early 2016, as well as the lift coming from foreign investment. Multifamily housing for New York NY fell 29 percent for the full year 2016, and during the first half of 2017 it was down 23 percent from a year ago. In addition, several other markets contributed to this year’s multifamily retreat, with these declines compared to especially elevated amounts during the first half of 2016 – Dallas-Ft. Worth TX, down 57 percent; Boston MA, down 51 percent; Miami FL, down 43 percent; Seattle WA, down 32 percent; and Chicago IL, down 6 percent. Even so, this year’s first half has seen multifamily housing advance in such markets as San Francisco CA, up 17 percent; Washington DC, up 13 percent, Atlanta GA, up 7 percent; while Los Angeles CA matched its improved 2016 amount. Murray indicated, “Although it’s true that lenders are exercising greater caution towards multifamily projects, more construction is taking place in those markets which have been relative latecomers to the expansion, and this is helping to limit the extent of the multifamily slowdown now underway at the national level.”
With regard to the steady performance by commercial building for the U.S. during the first half of 2017, this reflects gains for office buildings and warehouses, which have balanced weaker activity for stores, hotels, and commercial garages. Murray added, “Office buildings and warehouses continue to see low vacancy rates, and both project types are expected to show growth in construction starts when the full year 2017 figures are tallied. However, hotel construction starts appear to have reached a peak in 2016, which included groundbreaking for several large hotel and casino projects, while store construction has remained weak.” By geography, the top ten commercial and multifamily markets in the first half of 2017 were evenly split between those showing gains for commercial building and those showing declines. Increases were reported in this year’s