This article is from the Australian Property Journal archive
US multifamily housing staged a recovery in 2018 after it appeared to have reached a peak in 2016. Over $95 billion worth of multifamily projects were started, giving a shot in the arm to the construction sector.
According to Dodge Data & Analytics, total construction starts rose by 4% in 2018 to $212.4 billion, after falling by 3% in 2017, however it was not a uniformed recovery with only four of the top 10 markets posting increases, whilst six showed declines.
The increase was due largely to greater activity for multifamily housing, up 8% to $95.1 billion, and the commercial building categories as a group, up 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.
Meanwhile after surging 23% in 2016, commercial building starts have shown slight improvement, edging up 1% in both 2017 and 2018.
Dodge Data & Analytics chief economist Robert A. Murray said the brisk expansion for the US economy during 2018 enabled market fundamentals for commercial building and multifamily housing to strengthen, after having shown some erosion during the previous year.
“This provided the backdrop for the healthy volume of commercial and multifamily construction starts that took place during 2018,” he added.
Of the top 10 markets, ranked by the dollar amount of construction starts, four reported greater activity while six showed declines. For the metropolitan areas ranked 11 through 20, seven reported gains while three reported declines.
The New York NY metropolitan area, at $28.7 billion in 2018, continued to be the leading market in the US, rising 10% after its 13% drop in 2017. New York NY’s share of the US total was 14% in 2018, up from 13% in 2017, although not as high as its peak 19% share reported in 2015.
The next three markets were 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 which showed declines were – 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 this group 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%.
Although 2018 was the year of recovery, the outlook is not as rosy.
Murray said for 2019, the economic environment may not be quite as supportive to commercial and multifamily construction starts as what took place during 2018.
“The benefits of tax reform on economic growth are expected to wane, which may also dampen occupancies and rent growth, particularly as the supply of commercial and multifamily space rises with the completion of projects that reached groundbreaking in recent years.
“Furthermore, the most recent survey of bank lending officers conducted by the Federal Reserve suggests that a more cautious lending stance emerged during the latter half of 2018, especially with regard to loans for multifamily projects.” Murray said.
Australian Property Journal
