RCA Insights

Chart: US Major Metro Construction Trends

By on July 11th, 2018

Is capital flowing too quickly to construction-driven investment strategies in the U.S.? That question has dominated many discussions recently.

The chart below tracks changes in capital flows in the 6 Major Metros. If a redirection of capital to construction were truly a problem, most of the market and property type combinations would be in the top left quadrant. This quadrant represents markets and property types where capital deployed via construction is growing while that deployed in new acquisitions is falling.

There are two apartment markets in this top left quadrant, so one might note these markets with caution, but the other four apartment markets have a flat or falling pace of construction activity. The office sector has four metro areas with climbing construction and falling investment in existing assets.

Except for a few pockets of activity, there is little to fear from the current round of construction.

1807 COTW construction trends MAIN_150-01

Data analysis by Haley Crimmins.

This analysis first appeared in US Capital Trends. The new edition of US Capital Trends, which examines volume and pricing trends across the property types in Q2’18, will be published July 25. 

 

Jim Costello

Jim Costello

Senior Vice President
jcostello@rcanalytics.com

Jim Costello has worked in the CRE space on issues of urban economics since 1990, including a 20-year stint at Torto Wheaton Research. Jim expanded the reach of the Torto Wheaton Research team developing forecasts of global market fundamentals. He also developed approaches to pair the forecast results with frameworks to answer investor questions on asset values and relative investment opportunities.

In the aftermath of the Global Financial Crisis, Jim provided advice to the Treasury Department and helped educate these professionals on commercial real estate performance. Jim is a member of the Commercial Board of Governors of the Mortgage Bankers Administration, where he helps policy makers understand the commercial real estate industry.

Jim is expanding the capabilities of the Real Capital Analytics team on issues of real estate market dynamics. Jim has a master’s degree in economics and is a member of the Counselors of Real Estate.