The first half of 2022 was big in construction starts, says Dodge Construction Network. “During the first six months of the year, the value of commercial and multifamily construction starts in the top 20 metropolitan areas of the U.S. increased 24% from 2021.” On average, national starts were up 18% year to date.
Three major metros—Seattle, Los Angeles, and Philadelphia—among the top 10 in dollars faced a decline compared to the first half of 2021.
The biggest driver of the increase was demand for apartments and condos. As many analyses and statistics suggest, the combination of major geographic shifts and a long-standing large gap between housing needs and construction have helped boost activity. There has also been gating factors of supply chain problems, sky-high materials prices, and labor shortages that delayed many projects last year.
But the construction market has recovered, and beyond multifamily. “A nascent recovery in the commercial sector, however, has created more broad-based improvements across the country,” Dodge noted. “These increases are even more considerable as the sector continues to combat rising prices, shortages of key materials and labor, and higher interest rates.”
The top metro area was New York, which saw $15.3 billion in construction starts, or an increase of 20% over the same period in 2021. At $8.1 billion was Dallas, a jump of 72%. Number three was Washington, D.C., a 35% increase at $5.5 billion.
Some others of the top 10 that saw positive increases were Miami, Austin, Phoenix, and Atlanta. They ranged from $4.2 billion to $4.5 billion and increases of 31% to 70%.
The next 10 in dollar performance saw an even split between those that had a percentage increase year over year—Houston, Denver, Orlando, Tampa, and San Jose—and those that dropped (Boston, Chicago, Nashville, Minneapolis, and Kansas City).
The first 10 accounted for 40% of all commercial and multifamily starts. That was up from 37% last year. The second 10 were 16%, which was down from 2021’a 18%.
There is an important caveat to the study. “Not included in this ranking are institutional projects (e.g., educational facilities, hospitals, convention centers, casinos, transportation terminals), manufacturing buildings, single family housing, public works and electric utilities/gas plants,” Dodge noted. Given the success of industrial, just in warehousing and logistics, that’s a significant omission.
“The construction sector is at a crossroads,” Richard Branch, chief economist for Dodge Construction Network, says in prepared remarks. “The recovery from the pandemic morphed in 2022 by encompassing more sectors than just warehouses and single-family housing despite rampant inflation in construction materials, a lack of key goods, and a stark shortage of skilled construction labor.”
But with the state of the economy and the Fed’s moves to reduce inflation, “construction starts are likely to move sideways over the second half of the year and potentially stall as the calendar shifts into 2023,” Branch said.