You can also read our 2018 Top Development Commercial Firms, 2018 Top Development Multifamily Firms, 2017 Top Multifamily Development Firms, 2016 Top 50 Development Firms, 2015 Top Development Firms and 2014 Top Development Firms rankings.
Commercial real estate developers are facing a catch-22. Low interest rates have significantly lowered borrowing costs, encouraging builders to seek out more opportunities. But on the other hand, the cost of construction has increased significantly, and an extremely tight labor market continues to put upward pressure on wages. Further, in many states and markets, strict zoning regulations and required entitlements or permits challenges hamper construction starts. These obstacles, along with economic uncertainties, are leading us to forecast a slight drop in expected deliveries in most asset classes over the next few years.
Office development peaked in 2018 while multifamily activity hit its cycle high in 2017. Deliveries in both sectors are expected to level off in the coming years. With the current pipeline, we expect deliveries to total some 300,000 units over the next few years. Demographic shifts, including an aging population, growing student debt burdens and delayed household formation are fueling strong demand for the multifamily industry.
Self storage deliveries in the upcoming years are also expected to taper despite a cycle high in 2019. Demand in the sector is largely fueled by job growth in secondary cities as Millennials relocate from primary markets. Industrial is another hot asset class with a strong supply pipeline and low vacancy rates, driven by the expansion of e-commerce.
Trammell Crow Co. repeats in the No. 1 spot on 2019’s top development firm ranking, completing 36 million square feet between 2016 and 2018 with another 46 million square feet underway. Collectively, the top 10 firms had approximately 134 million square feet under construction or 76 percent of the total pipeline of our respondents. Of the 30 firms on our list, only three indicated they expected to reduce development activity compared to the previous six quarters.
The 2019 CPE–MHN Top 30 Developers ranking utilized self-reported data for all firms. The ranking is a weighted formula based on a variety of factors (only a few of which are specified here), including current and future plans, market value of projects completed and under construction, and geographic and property diversification. The ranking represents what we feel is a logical balance between firm growth and market share.
Madeline Winship is a senior research analyst at Yardi Matrix.