By Keith Loria, Contributing Editor
Dodge Data & Analytics latest report reveals that New York City came out on top as the No.1 metropolitan area by dollar amount for commercial and multifamily construction starts in 2015, totaling $34.9 billion.
Rounding out the top 5 were Miami ($6.3 billion), Dallas-Ft. Worth ($6 billion), Chicago ($5.9 billion), and Washington, D.C. ($5.9 billion).
“At the national level, the construction expansion for commercial building and multifamily housing is proceeding, with some variation,” Robert A. Murray, Dodge Data & Analytics’ chief economist, told CPE. “The upward movement by commercial building sector has at times been hesitant, while multifamily housing has shown steadier growth.”
The construction start statistics reveal commercial building steadily rising from 2011 through the present, including noteworthy gains of 22 percent in both 2013 and 2014. The latter year was lifted by the start of several massive projects, such as the Apple headquarters in Cupertino, Calif.
“In 2015, commercial building at the national level edged up 0.4 percent, essentially maintaining the improved level achieved in the prior year,” Murray said. “While tech-related projects were important for the commercial building upturn in 2014, more typical commercial building projects such as the Hudson Yards development in New York City assumed a greater role during 2015 in maintaining the improvement shown by commercial building so far.”
Whereas in 2014 groundbreaking for commercial building projects in the New York City metropolitan area were up only 1 percent, in 2015 such projects surged 95 percent.
Examining the commercial sector, in general, support has come from positive market fundamentals, namely rising occupancy rates and rents.
“In addition, the search for yield has led some real estate investors to make the shift from property ownership to property development, where higher yields are possible given the fact that property values in many markets have already risen sharply,” Murray said. “One noteworthy case which demonstrates that changing market fundamentals can cause a shift in development is Houston, Texas. With the steep slide in the price of oil, the energy sector has taken a hit, and office vacancy rates in the Houston market have climbed more than four percentage points over the past year.”
In 2014, new commercial building construction starts surged 92 percent in Houston, but retreated 45 percent in 2015.
For 2016, Dodge Data & Analytics is predicting that commercial building and multifamily housing combined will advance 8 percent in dollar volume at the national level, with commercial building up 10 percent, while multifamily housing rises 6 percent, a more subdued rate of growth that reflects a maturing expansion for this project type.