Multifamily Construction Starts Down In Many Top Metro Areas In 2017

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The Editors's picture
Multifamily Construction Starts Down In Many Top Metro Areas In 2017

The 7% drop for commercial and multifamily construction starts at the U.S. level in 2017 reflected mostly a multifamily pullback, according to Dodge Data and Analytics.

Multifamily construction starts at the U.S. level in 2017 dropped 12% to $84.9 billion, which followed a 10% increase in 2016 ($96.1 billion).  Commercial building construction starts in 2017 slipped 3% to $109.8 billion, staying close to the 2016 level ($113.1 billion) achieved with a 22% hike that year, according to a release.

Multifamily construction reached its peak

"Of the commercial and multifamily project types, multifamily housing is the one that appears to have already reached its peak and is now heading downward, as shown by the 12% decline in dollar terms during 2017," Robert A. Murray, chief economist for Dodge Data & Analytics, said in the release.

 "The expansion for multifamily housing began back in 2010, and in 2015 it benefitted from a surge of activity in the New York metropolitan area and then in 2016 it showed broader growth geographically due to strong gains by other major metropolitan areas. 

“That pattern shifted in 2017, as markets such as Los Angeles, Dallas-Ft. Worth, and Washington,  D.C. retreated from the levels posted during 2016.  Multifamily vacancy rates, while still low historically, have been edging up slightly on a year-over-year basis for almost two years. 

Banking sector more cautious about multifamily construction

“In addition, the banking sector has taken a more cautious stance towards lending for multifamily projects,” he said.

“In the most recent survey of bank lending officers by the Federal Reserve. 16% of the respondents indicated that they had tightened standards for multifamily loans during the fourth quarter of 2017, compared to just 1% of the respondents that reported tightening for nonresidential building project loans.

 “At the same time, the downturn for multifamily housing at the national level is expected to stay moderate for the near term, as the latecomers to the multifamily expansion, particularly in the smaller markets, continue to see growth," Murray said in the release.

 By geography, eight of the top ten commercial and multifamily markets in 2017 registered declines for multifamily housing:

  • New York NY, down 4%
  • Los Angeles CA, down 17%
  • Dallas-Ft. Worth TX, down 26%
  • Washington DC, down 23%
  • Miami FL, down 50%
  • Chicago IL, down 24%
  • Seattle WA, down 10%
  • Boston MA, down 29%
  • The two markets in the top ten showing multifamily gains in 2017 were San Francisco CA, up 3%; and Atlanta GA, up 26%. 

Seattle multifamily construction down 10%

The Seattle metropolitan area saw its commercial and multifamily construction start total for 2017 hold steady with its 2016 amount. 

While multifamily housing retreated 10%, commercial building improved 8% following its 50% jump in 2016. 

There were four large office projects in Seattle that were entered as construction starts in 2017:

  • The $331 million office portion of the $570 million Rainier Square mixed-use building
  • A $280 million portion of the Amazon Block 21 development
  • A $228 million office tower
  • The $163 million renovation of the Expedia Seattle Campus. 

In addition, warehouse construction starts strengthened in 2017, helped by a $93 million Amazon distribution center in Sumner and the $80 million Blair Logistics Center in Tacoma. 

Some multifamily construction in Seattle

Although down moderately, multifamily housing in 2017 did see groundbreaking for several large projects in Seattle:

  • The $152 million 1200 Howell St. apartment tower
  • The $138 million multifamily portion of the Rainier Square mixed-use building
  • The $111 million multifamily portion of the $175 million WeWork Seattle mixed-use tower.

Multifamily Construction Starts Down In Many Top Metro Areas In 2017

About Dodge Data & Analytics:  Dodge Data & Analytics is North America's leading provider of analytics and software-based workflow integration solutions for the construction industry. Building product manufacturers, architects, engineers, contractors, and service providers leverage Dodge to identify and pursue unseen growth opportunities and execute on those opportunities for enhanced business performance. Whether it's on a local, regional or national level, Dodge makes the hidden obvious, empowering its clients to better understand their markets, uncover key relationships, size growth opportunities, and pursue those opportunities with success. The company's construction project information is the most comprehensive and verified in the industry. Dodge is leveraging its 100-year-old legacy of continuous innovation to help the industry meet the building challenges of the future.  To learn more, visit www.construction.com.

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