During the first half of 2018, five of the top 10 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 20 markets, 11 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 percent from last year’s first half, although still 2 percent above what was reported during the first half of 2016.
The New York metropolitan area, at $16.1 billion during the first half of 2018, held onto its No. 1 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 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 10 showing growth during the first half of 2018 were Washington, D.C. ($5.0 billion), up 23 percent; Miami ($4.9 billion), up 34 percent; Boston ($3.7 billion), up 56 percent; and Seattle ($3.2 billion), up 7 percent. Of these markets, the top four (New York, Washington, D.C., 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 ($3.4 billion), down 23 percent; Los Angeles ($2.9 billion), down 38 percent; San Francisco ($2.8 billion), down 38 percent; Chicago ($2.7 billion), down 37 percent; and Atlanta ($2.0 billion), down 43 percent.
For those markets ranked 11 through 20, the six that registered first half 2018 gains were Austin, Texas, ($1.8 billion), up 15 percent; Kansas City, Missouri, ($1.7 billion), up 52 percent; Orlando ($1.6 billion), up 4 percent; Phoenix ($1.6 billion), up 19 percent; Minneapolis-St. Paul ($1.3 billion), up 34 percent; and Portland ($1.1 billion), up 15 percent. The four posting declines were Houston ($1.9 billion), down 13 percent; Philadelphia ($1.7 billion), down 13 percent; Denver ($1.6 billion), down 25 percent; and San Jose, California, ($1.1 billion), down 37 percent.
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 percent drop for the commercial and multifamily total during the first half of 2018 reflected an 8 percent retreat for commercial building that was essentially balanced by an 8 percent increase for multifamily housing.
“Multifamily housing has proven to be surprisingly resilient so far during 2018, following its 8 percent 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.”
The 44 percent increase registered by the New York metropolitan area during the first half of 2018 was the result of an 83 percent hike for commercial building combined with 22 percent improvement for multifamily housing. Previously, construction starts had retreated 15 percent in 2016 and 13 percent in 2017, following a 62 percent surge back in 2015. New office construction starts soared 114 percent in the first half of 2018, although as a point of perspective it was still 25 percent below the robust volume reported during the first half of 2015. Large office projects that reached groundbreaking during the first half of 2018 were the $1.8 billion Spiral office building and the $480 million Hudson Commons office building addition, both in the Hudson Yards district of Manhattan, and the $233 million office portion of the $300 million One Willoughby Square mixed-use project in Brooklyn. Hotel construction had a strong first half of 2018, rising 246 percent with the lift coming from such projects as a $300 million Tribeach Holdings hotel, the $180 million Margaritaville Hotel, and the $125 million Hard Rock Hotel, all located in midtown Manhattan. As for the other commercial project types, garages were up 37 percent, but stores slipped 1 percent and warehouses fell 27 percent. The 22 percent increase for multifamily housing during the first half of 2018 reflected the start of 15 projects valued each at $100 million or more, led by the $700 million City View Tower at Court Square and the $550 million Queens Plaza Park Apartments, both in Long Island City, and the $232 million Journal Squared 2 apartment building in Jersey City, New Jersey.
The Washington DC metropolitan area grew 23 percent during the first half of 2018, with commercial building up 31 percent and multifamily housing up 16 percent. During 2017, commercial and multifamily construction starts had retreated 15 percent for the full year after a 39 percent gain in 2016. New office construction starts were up 55 percent in the first half of 2018, lifted by the start of five data centers in Ashburn, Virgian, with a combined construction cost of $840 million. Other large office-related projects that reached groundbreaking during the first half of 2018 were the $245 million U.S. Citizenship and Immigration Services building in Suitland, Maryland, the $153 million M St. office and television production studios in Washington, D.C., the $140 million Stafford Place office renovation project in Arlington, Virgina, and the $75 million office portion of the Apex complex in Bethesda, Maryland. The performance by the other commercial project types was mixed, with gains for hotels (up 222 percent) and warehouses (up 1 percent), while declines were reported for commercial garages (down 24 percent) and stores (down 28 percent). There were three multifamily projects valued each at $100 million or more that reached groundbreaking during the first half of 2018 – the $162 million multifamily portion of the Apex complex in Bethesda, Maryland, a $130 million townhouse development in New Market, Maryland, and the $112 million multifamily portion of the $150 million Fairfax Circle Plaza mixed-use building in Fairfax, Virginia.
The Miami metropolitan area climbed 34 percent during the first half of 2018, with the boost coming from a 95 percent jump for multifamily housing while commercial building settled back 6 percent. During 2017, the Miami market had fallen 20 percent for the full year after its 25 percent increase in 2016. The $2.8 billion of multifamily projects that reached groundbreaking during the first half of 2018 topped the $2.5 billion reported for the first half of 2016, which contributed to the record high $5.5 billion of multifamily construction starts reported for the full year 2016. There were eight multifamily projects valued each at $100 million or more that reached groundbreaking during the first half of 2018, led by the $300 million One River Point condominium tower and the $213 million Aston Martin condominium residences, both in Miami, and the $180 million Estates at Acqualina condominium tower in Sunny Isles Beach. On the commercial side, store construction increased 16 percent, lifted by the $271 million Bal Harbour Shops expansion in Bal Harbour. Gains were also reported for commercial garages (up 31 percent) and warehouses (up 15 percent), but declines were reported for office buildings (down 9 percent) and hotels (down 46 percent). The decline for hotel construction was relative to a strong first half of 2017, which included the $575 million hotel portion of the $900 million Seminole Hard Rock Hotel and Casino in Hollywood, Florida.
Commercial and multifamily construction starts in the Boston metropolitan area soared 56 percent during the first half of 2018. Previously, the commercial and multifamily total had dropped 27 percent for the full year 2017 after a 54 percent gain in 2016. Multifamily housing during the first half of 2018 jumped 146 percent, while commercial building slipped 4 percent. The multifamily dollar amount during the first half of 2018 was $2.3 billion, which topped the $2.0 billion in the first half of 2016 that contributed to the record high $3.2 billion reported for the full year 2016. There were four multifamily projects valued each at $100 million or more that reached groundbreaking during the first half of 2018 – a $215 million apartment building near the TD Garden arena, the $188 million Washington St. apartment building, the $157 million Waterside Place apartment building, and the $140 million Harrison Avenue apartment building, all located in Boston. Commercial building during the first half of 2018 slipped 4 percent from a year ago, due to varied behavior by its individual project types. Office construction starts registered a 26 percent gain, led by such projects as the $88 million addition to a Harrison Avenue office building in Boston and the $55 million renovation to the Bristol-Myers Squibb office building in Cambridge MA. Store construction climbed 7 percent during the first half of 2018, but declines were reported for commercial garages (down 16 percent), warehouses (down 44 percent), and hotels (down 71 percent).
The Dallas-Ft. Worth TX metropolitan area retreated 23 percent during the first half of 2018 from a year ago, as a 7 percent increase for multifamily housing was outweighed by 36 percent drop for commercial building. For the full year 2017, commercial and multifamily construction starts had fallen 12 percent, which followed very strong increases in 2015 (up 60 percent) and 2016 (up 28 percent). The commercial building total during the first half of 2018 featured a substantial decline for new office starts, down 52 percent, as well as weaker activity for hotels (down 56 percent), commercial garages (down 55 percent), and stores (down 14 percent), while new warehouse starts grew 6 percent. The first half of 2017 had seen the start of such projects as the $300 million American Airlines Trinity Campus and a $300 million Facebook data center, both in Ft. Worth, the $138 million Dallas County Records building complex in Dallas, and the $115 million Westin convention center hotel in Irving. The large commercial building projects entered as construction starts during the first half of 2018 were generally smaller in scale than last year, including another Facebook data center in Ft. Worth valued at $183 million and a $52 million bank corporate headquarters in McKinney, plus several large warehouse projects like the $71 million Gateway Logistics Center at DFW International Airport. Multifamily housing during the first half of 2018 was up 7 percent over a year ago, led by such projects as the $135 million Skyhouse Frisco Station apartments and the $80 million Star House apartments, both in Frisco, and the $80 million Epic Hamilton residential tower in Dallas.
The 7 percent increase for commercial and multifamily starts in the Seattle metropolitan area during the first half of 2018 was the result of a 66 percent surge for multifamily housing, which outweighed a 46 percent decline for commercial building. The Seattle metropolitan area registered yearly increases for its commercial and multifamily total from 2011 through 2017, including gains of 27 percent in 2016 and 8 percent in 2017, so the first half 2018 increase is maintaining a well-established upward track. There were five multifamily projects valued each at $100 million or more that reached groundbreaking during the first half of 2018, led by the $429 million multifamily portion of the $516 million 1200 Stewart St. mixed-use development, the $398 million multifamily portion of the $450 million Seattle Times mixed-use development, and the $200 million 6th Avenue and Wall St. building, all located in Seattle. The first half 2018 decline for commercial building was relative to a strong first half of 2017, that included such projects as a $210 million office tower in Seattle and a $93 million Amazon distribution center in Sumner. The largest commercial projects that reached groundbreaking during the first half of 2018 were smaller in scale, led by the $52 million garage portion of the Seattle Times project, the $46 million garage portion of the $810 million Washington State Convention Center project (whose $764 million convention center portion is classified as an institutional building which is not included in the commercial building total), and the $39 million hotel portion of a $140 million hotel and casino in Tulalip.
The Los Angeles metropolitan area posted a 38 percent decline for commercial and multifamily construction starts during the first half of 2018. Yearly growth had been registered by this metropolitan area from 2010 through 2016, before a 15 percent drop was reported for 2017. Multifamily housing construction starts retreated 48 percent during the first half of 2018, compared to last year’s first half that included groundbreaking for such multifamily projects as the $349 million multifamily portion of the $500 million One Beverly Hills mixed-use development in Beverly Hills and the $287 million multifamily portion of the $364 million Jefferson Stadium Park apartment complex in Anaheim. While the first half of 2017 had seven multifamily projects valued at $100 million or more that reached groundbreaking, there was just one such project during the first half of 2018 – the $150 million Lincoln Collection multifamily development in Santa Monica. Commercial building dropped 22 percent from its elevated first half 2017 amount, that included the start of such projects as the $106 million hotel portion of the One Beverly Hills mixed-use development, a $69 million logistics center in Arcadia, and the $60 million renovation of the Burbank Town Center in Burbank. Within the commercial total, declines were reported for stores (down 29 percent), hotels (down 39 percent), and warehouses (down 86 percent), while gains were reported for office buildings (up 18 percent) and commercial garages (up 10 percent). The office category was lifted by the start of the $116 million Academy Square office building in Los Angeles and an $80 million office building in Playa Vista, while the garage category was lifted by the start of a $135 million garage at Disneyland in Anaheim.
Commercial and multifamily construction starts in the San Francisco metropolitan area fell 38 percent during the first half of 2018 from the elevated activity during last year’s first half. This metropolitan area had shown strong annual increases during the past two years, with activity up 95 percent in 2016 and another 30 percent in 2017. The first half of 2017 included the start of several very large projects, led by the $1.3 billion Oceanwide Center tower in San Francisco, with the following allocation by structure type – office building at $780 million, multifamily housing at $387 million, hotel at $95 million, and garage at $38 million. Other large projects that reached groundbreaking during the first half of 2017 included the $361 million office portion of the $1.0 billion Golden State Warriors arena complex in San Francisco and a $310 million Facebook office building in Menlo Park. The commercial building amount during the first half of 2018 was down 51 percent from a year ago, with declines for offices (down 81 percent), stores (down 62 percent), and garages (down 18 percent), while gains were reported for hotels (up 84 percent) and warehouses (up 110 percent). The hotel category was lifted by the start of the $225 million Grand Hyatt Airport Hotel at San Francisco International Airport, while the warehouse category was lifted by the start of a $107 million research and development complex in Fremont. Multifamily housing during the first half of 2018 was down 19 percent from its first half 2017 amount, although the current year has seen groundbreaking for such multifamily projects as the $173 million multifamily portion of a $200 million mixed-use development in Oakland and the $98 million multifamily portion of a $150 million Market St. mixed-use building in San Francisco.
The Chicago metropolitan area registered a 37 percent decline for commercial and multifamily construction starts in the first half of 2018, with commercial building down 11 percent and multifamily housing down 61 percent. The first half of 2017 featured the start of several very large projects, including the $650 million One Grant Park multifamily high-rise, the $500 million renovation of the Willis Tower, and the $280 million One South Halstead multifamily high-rise, all located in Chicago. The metropolitan area had experienced a particularly strong level of commercial and multifamily construction starts back in 2016, when activity climbed 41 percent, and while starts fell 26 percent for 2017 as a whole it was still a strong year by recent historical standards. During the first half of 2018, the largest multifamily projects were the $104 million Union West apartment complex in Chicago, a $70 million apartment building in Northbrook, and a $57 million apartment complex in Lisle. The commercial categories during the first half of 2018 retreated to varying degrees, with stores down 8 percent, commercial garages down 17 percent, hotels down 18 percent, office buildings down 23 percent, and warehouses down 52 percent. Even with these declines, several noteworthy commercial building projects reached groundbreaking during the first half of 2018, including the $665 million 110 North Wacker Drive office tower in Chicago, the $130 million parking garage expansion at Midway International Airport, and a $100 million Hilton Hotel in Chicago.
The Atlanta GA metropolitan area witnessed a 43 percent reduction for commercial and multifamily construction starts during the first half of 2018 compared to a year ago. This metropolitan area had been one of the “latecomers” to the commercial and multifamily expansion, as it showed strong yearly growth over the past two years, with 2016 up 58 percent and 2017 up 25 percent. Commercial building during the first half of 2018 was down 51 percent compared to a strong first half of 2017 that included the start of such projects as the $240 million Coda Building, the $190 million Kroger store and office building, and a $120 million UPS logistics center, all located in Atlanta. By individual commercial category, across-the-board declines were reported compared to a year ago, with stores down 8 percent, hotels down 42 percent, commercial garages down 45 percent, warehouses down 51 percent, and office buildings down 65 percent. The noteworthy commercial projects that reached groundbreaking during the first half of 2018 were the $80 million T3 West Midtown office building in Atlanta, a $45 million warehouse in Union City, and the $35 million 740 West Peachtree office building in Atlanta. Multifamily housing during the first half of 2018 was down 33 percent compared to a year ago, which included nine multifamily projects valued each at $50 million or greater. In the first half of 2018 there were four such projects, led by the $129 million AMLI Oak Valley apartment complex, the $90 million Piedmont student apartment tower, and the $83 million Generation Atlanta apartment tower, all located in Atlanta.