It should be of little surprise to learn that commercial and multifamily construction starts fell sharply in 2020 in the face of pressures from the COVID-19 pandemic. According to Richard Branch, chief economist, Dodge Data & Analytics, the pandemic has had and will continue to produce a significant negative impact on this market segment across the country.
In its latest findings, Dodge Data & Analytics indicates the value of commercial and multifamily construction starts in the top 20 metropolitan areas of the U.S. declined 23% in 2020, falling to $111.1 billion. Its commercial and multifamily total is comprised of office buildings, stores, hotels, warehouses, commercial garages, and multifamily housing. Not included are institutional building projects, manufacturing buildings, single-family housing, public works and electric utilities/gas plants.
Nationally, commercial and multifamily construction starts declined 20% for the year to $193.4 billion from the $240.3 billion posted in 2019. Commercial building starts plunged 26% to $104.0 billion, while multifamily building activity slid 11% lower to $89.5 billion.
The top 10 metropolitan areas accounted for 41% of all U.S. commercial and multifamily construction starts in 2020, down from a 43% share in 2019. Commercial and multifamily construction starts in these areas fell 23% for the year with only one metro area reporting an increase. Commercial building starts dropped 26%, while multifamily building activity fell 21%.
The New York metropolitan area continued to be the largest market for starts at $23.5 billion despite suffering a stark 25% decline from 2019. Houston suffered the biggest dip, sliding a staggering 47% to $4.5 billion. Phoenix, AZ, on the other hand, posted a 32% gain, climbing to $5.3 billion.
Metro areas filling out the rest of the top 20 accounted for 17% of total U.S. commercial and multifamily activity in 2020, the same share as in the previous year. However, these areas also saw a 23% shortfall from 2019. Commercial building starts fell 30% in 2020, while multifamily building starts lost 15%.
Of these areas, Atlanta, GA (-41% to $4.3 billion), San Francisco, CA (-46% to $2.4 billion) and Minneapolis, MN (-42% to $2.4 billion) experienced the biggest declines in 2020. Only Denver, CO (+17% to $3.3 billion), and Kansas City, MO (+20% to $2.5 billion) posted increases for the year.
The pain felt in most parts of the country will not ease quickly. “While some areas stabilized over the summer, the current wave of the virus has further hindered activity,” Branch stated. While the recently passed $900 billion stimulus plan will go a long way toward re-energizing the economy, it’s not a complete panacea. “The construction sector will show signs of recovery in 2021, but the road back to full recovery will be long and difficult. The effects of the pandemic on the U.S. economy and building markets will be felt for several years.”
Click here to access a full breakdown of activity in the top 20 metropolitan areas, along with an audio analysis by Branch on what’s happened in the top 10 locations.
Information provided by Dodge Data & Analytics and substantially edited by Becky Schultz.