Dodge: 2021 Commercial and Multifamily Construction Starts Up 18% in Top 20 U.S. Metro Areas

Top 20 metropolitan areas saw an 18% gain in commercial and multifamily construction starts compared to 16% nationally, but there is still ground to gain to reach 2019 levels.

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Commercial and multifamily construction starts regained lost ground in 2021 in most major metropolitan areas following the fallout of the pandemic in 2020. According to Dodge Construction Network (Dodge), the value of commercial and multifamily construction starts in the top 20 U.S. metro areas increased 18% from 2020 to 2021, compared to 16% on a national basis.

In 2021, total U.S. commercial and multifamily building starts – comprised of office buildings, stores, hotels, warehouses, commercial garages and multifamily housing – rose 16% to $236.6 billion from 2020 levels. Commercial starts were up 8% to $120.3 billion nationally, while multifamily starts were 25% higher at $116.4 billion, Dodge reports.

Out of the top 20 metro areas, the top 10 saw overall commercial and multifamily starts rise 18%, with only Washington, DC, and Los Angeles, CA, posting declines. Commercial building starts were up 11% to $45.1 billion in 2021, while multifamily starts gained 25% to $48.0 billion, Dodge reports.

The top 10 accounted for 39% of all commercial and multifamily starts in the U.S., unchanged from 2020.

The top three metro areas in 2021 were:

  • New York with commercial and multifamily starts at $26.8 billion, a 14% increase from 2020;
  • Dallas, TX with $10.7 billion in starts and an impressive 45% gain over 2020;
  • and Miami, FL with starts totaling $8.4 billion and a “dramatic” 65% increase from the prior year.

The remaining top 10 metro areas fared as follows:

  • Washington, DC, -9% ($8.4 billion)
  • Boston, MA, +16% ($7.3 billion)
  • Los Angeles, CA, -12% ($7.1 billion)
  • Atlanta, GA, +49% ($6.6 billion)
  • Seattle, WA, +48% ($6.2 billion)
  • Phoenix, AZ, +11% ($6.0 billion)
  • Houston, TX, +5% ($5.5 billion).

Commercial and multifamily starts in the second largest group of metro areas (ranked 11-20) rose 17% in 2021, with only Chicago, IL (-31%; $4.9 billion), and Nashville, TN (-8%; $3.7 billion), posting year-over-year declines. Commercial building starts in these areas fell 4% from 2020, while multifamily starts rose a substantial 42%.

The remainder of this group included:

  • Philadelphia, PA, +30% ($5.5 billion)
  • Austin, TX, +9% ($5.4 billion)
  • Orlando, FL, up 40% ($4.3 billion)
  • Denver, CO, up 21% ($4.3 billion)
  • Minneapolis, MN-WI, up 60% ($4.1 billion)
  • San Diego, CA, up 93% ($3.9 billion)
  • San Francisco, CA, up 22% ($3.7 billion)
  • Riverside, CA, up 41% ($3.1 billion)

This secondary group of metro areas accounted for 18% of all commercial and multifamily starts in the U.S. in 2021, Dodge reports, unchanged from the previous year.

Still Progress to Be Made

Despite the year-over-year gains, commercial and multifamily starts in 2021 remained below 2019 levels, with larger metro areas especially struggling to regain momentum as demand for construction shifted away from denser urban centers.

Compared to 2019's peak, commercial and multifamily starts in 2021 were down 2% on a national basis and down 5% in the top 20 metro areas. For the top 10 metros, commercial and multifamily starts were 9% below 2019, while metro areas ranked 11-20 saw starts up 5% from 2019, reflecting the growing popularity of such less densely populated environments.

Even though there remains ground to cover to return to 2019 levels, overall, Richard Branch, chief economist, Dodge Construction Network, sees 2021’s gains in commercial and multifamily construction starts as a strong rebound given the ongoing COVID-19 pandemic impacts.

“This recovery… has been fairly uneven with the focus on warehouse and multifamily activity, while office and hotel construction remain more constrained by the pandemic,” Branch noted. “Looking ahead, 2022 should bring with it a more even recovery spread across most commercial project types, while multifamily will continue to benefit from the high cost of single-family homes.

However, he cautions, "While positivity abounds for the year ahead, be aware that high material prices and a shortage of skilled labor will prove to be limiting factors and will restrain overall growth.”

Information provided by Dodge Construction Network and edited by Becky Schultz.

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