Construction Starts “Crushed” by Pandemic in First Half of Year

According to a new report from Dodge Data & Analytics, while commercial and multi-family starts were quite healthy during January and February, the subsequent COVID-19 pandemic and resulting recession have “wreaked havoc” on these markets since then.

In commercial and multifamily, Dodge Data & Analytics covers office buildings, stores, hotels, warehouses, commercial garages and multifamily housing.

The report noted that the full force of the pandemic bore down on U.S. construction starts in April, as economic activity virtually shut down, and local restrictions on construction took effect.

It added that, “the damage to commercial and multifamily construction during the first half of the year was palpable.”

Starts plunged 22% below the first half of 2019, with only warehouse construction posting a very small gain. Specifically, commercial and multifamily construction starts in the top 20 metro areas posted a similar drop of 22% through the first six months of 2020.

“The COVID-19 pandemic and recession have devastated most local construction markets,” said Richard Branch, chief economist for Dodge Data & Analytics. “Across the board, building projects have been halted or delayed, with virtually no sector immune from damage.”

Branch added that construction starts have begun to increase from their April lows, and there is “cautious optimism” that, as the year progresses, construction markets around the country will begin a modest recovery. However, the recent acceleration in the number of COVID-19 cases and the upcoming expiration of expanded unemployment insurance “puts the recovery at significant risk and could undermine the construction sector’s ability to grow,” he added.

Nine of the top 10 metro markets saw drops. These are (in order of size of market): New York (down 24%), Washington, D.C. (down 42%), Dallas (down 2%), Los Angeles (down 18%), Chicago (down 9%), Boston (down 31%), Miami (down 16%), Phoenix (up 82%, Austin (down 12%) and Houston (down 38%).

In the second tier (numbers 11 to 20), nine of the ten saw drops. The exception was Detroit, with an increase of 96%.

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