US Commercial, Multifamily Construction Totaled $212B in 2018

NEW YORK CITY—US commercial and multifamily construction rose 4% in 2018 to $212.4 billion, according to a report released today by Dodge Data & Analytics.

The level of commercial and multifamily construction last year served as a moderate rebound to levels posted in 2017, which were 3% lower than activity posted in 2016. The modest increases for commercial and multifamily construction starts in the US in 2018 were paced by an 8% rise in multifamily housing to $95.1 billion, while the commercial building categories as a group, grew 1% to $117.3 billion.

Multifamily housing in 2017 had fallen 8% after appearing to have reached a peak in 2016, before posting the 8% rebound in 2018. After surging 23% in 2016, commercial building starts have shown slight improvement, edging up 1% in both 2017 and 2018, Dodge Data & Analytics stated in the report.

The Dodge report noted that 11 of the top 20 markets showed an increase in the dollar value of construction starts, while nine posted declines.

The New York City metropolitan area remained the top market in the US with $28.7 billion in commercial/ multifamily construction starts, an increase of 10% after posting a 13% decline in 2017. New York’s share of the US total was 14% in 2018, up from 13% in 2017, although not as high as its peak 19% share registered in 2015.

The next three markets in the 2018 top 10 all showed gains as compared to 2017—Washington DC ($9.5 billion), up 28%; Boston MA ($9.2 billion), up 72% and Miami FL ($8.2 billion), up 19%.

The remaining six markets in the top 10 posted declines relative to their respective 2017 totals—Los Angeles CA ($7.0 billion), down 11%; Dallas-Ft. Worth TX ($6.9 billion), down 16%; Chicago IL ($6.7 billion), down 1%; San Francisco CA ($6.0 billion), down 18%; Atlanta GA ($5.7 billion), down 14% and Seattle WA ($5.7 billion), down 14%.

For the metropolitan areas ranked 11 through 20, the seven showing greater activity in 2018 relative to 2017 were—Houston TX ($4.5 billion), up 9%; Austin TX ($4.0 billion), up 22%; San Diego CA ($3.1 billion), up 12%; Minneapolis-St. Paul MN ($3.0 billion), up 16%; Phoenix AZ ($2.8 billion), up 5%; Kansas City MO-KS ($2.8 billion), up 46%; and Sacramento CA ($2.3 billion), up 44%. The three metropolitan areas in the top 20 with decreased dollar amounts of commercial and multifamily starts in 2018 were: Philadelphia PA ($4.0 billion), down 6%; Denver CO ($2.8 billion), down 23% and Orlando FL ($2.6 billion), down 19%.

“The brisk expansion for the U.S. economy during 2018 enabled market fundamentals for commercial building and multifamily housing to strengthen, after having shown some erosion during the previous year,” states Robert A. Murray, chief economist for Dodge Data & Analytics. “This provided the backdrop for the healthy volume of commercial and multifamily construction starts that took place during 2018. A further boost came as a number of very large projects reached groundbreaking last year.”

Some of the major projects in the US that turned the first dirt in 2018 included in the office sector the $1.8-billion Spiral office building in the Hudson Yards district in New York City, a $665-million office building on North Wacker Drive in Chicago IL, and the $644-million office portion of the $1.3 billion Winthrop Square Tower in Boston.

Large data center project starts, which are included in the office category, were also very strong in 2018, with the Washington DC area seeing the start of 11 data center projects valued at a combined $1.6 billion.

Hotel construction starts in 2018 were led by the $643-million hotel portion of the $1.5 billion Manchester Pacific Gateway mixed-use complex in San Diego CA and the $450-million Omni Seaport Hotel in Boston.

Large multifamily projects that broke ground in 2018 included the $700-million City View Tower at Court Square and the $600-million 85 Jay St. high-rise, both in the New York NY metropolitan area, as well as the $580-million multifamily portion of Boston’s Winthrop Square Tower and the $429-million multifamily portion of the 1200 Stewart St. mixed-use high-rise project in Seattle.

Deeper Dive into Top Three Markets

NEW YORK—Office construction starts in the New York metro region rose 22% in 2018. In addition to the Spiral groundbreaking at Hudson Yards, other notable projects according to the Dodge report included the $480-million addition to the Hudson Commons office building, also in the Hudson Yards district; the $250-million gut rehabilitation of the former Domino Sugar Factory and the $233-million office portion of the $300 million One Willoughby Square mixed-use development, both in Brooklyn.

New hotel construction starts in the city rose sharply by 118%. Among the top construction starts last year were the $300-million Tribeach Holdings Hotel in Manhattan and the $218-million hotel portion of the $400-million Resorts World Casino and Hotel expansion in South Ozone Park. Store construction starts improved 4% in 2018, while multifamily housing in the New York metropolitan area edged up 2% in 2018 following a 1% gain in 2017, as construction starts have shown slight growth since the 27% correction that was reported back in 2016.

Leading the way for the multifamily housing in 2018 was the $700-million City View Tower at Court Square and the $550-million Queens Plaza Park Apartments in the Long Island City section of Queens, as well as the $600-million 85 Jay St. and the $375-million Hoyt St. high-rises in Brooklyn. During 2018, there were 24 multifamily projects valued at $100 million or more that broke ground, the same as the 24 such projects that reached groundbreaking in 2017.

WASHINGTON, DC—The commercial upturn in Washington, DC was led by a strong performance for the office category, rising 36%. In addition to the 11 data center projects, there were several major office building projects that broke ground in 2018, led by the $475-million office portion of the $600-million Marriott Headquarters and Hotel in Bethesda MD, the $245-million U.S. Citizenship and Immigration Services building in Suitland-Silver Springs MD, and the $160-million M Street NW office building in Washington DC. The hotel category climbed sharply in 2018, with construction starts rising 194% fueled by the $77-million hotel portion of Bethesda’s Marriott Headquarters and Hotel and a $50-million renovation of the W Hotel in Washington DC.

Warehouse construction starts in the DC market area in 2018 increased 46%, while store construction starts were flat. The 26% increase for multifamily housing in 2018 followed a 23% decline in 2017. There were five multifamily projects valued at $100 million or more that reached groundbreaking in 2018, led by the $380-million Highlands residential towers in Arlington VA and the $185-million Apex residential towers in Bethesda, Dodge stated in the report.

BOSTON—The Boston MA metropolitan area surged 72% to $9.2 billion in 2018, following a 27% decline for commercial and multifamily construction starts in 2017. Commercial building in the Boston metro rose 73% and multifamily housing soared by 71%, sparked by the groundbreaking for the $1.3-billion Winthrop Square Tower in Boston, which boosted both construction segments.

Office construction starts in 2018 increased 102%, led by the $644-million office portion of the Winthrop Square Tower. Additional large office projects that started in 2019 were a $150-million office building in Cambridge and an $88-million office building addition in Boston.

The hotel category increased by 139% in 2018, led by the $450-million Omni Seaport Hotel in Boston. Store construction starts improved 38% in 2018, while warehouse construction starts retreated 26%. The 71% jump for multifamily housing in 2018 came after a 32% decline in 2017. There were seven multifamily projects valued at $100 million or more that were reported as construction starts in 2018, led by the $580-million multifamily portion of the Winthrop Square Tower, the $215-million Garden Garage apartment building and the $188-million 159 Washington St. multifamily complex.