RCA Insights

US Markets Leaning to Construction: Chart

By on March 6th, 2019

Data analysis by Haley Crimmins

Should investors fear capital flows to new construction in the U.S.? How much is too much? The ratio of capital flowing to new construction relative to that going into existing assets suggests little to fear in many markets.

Markets with a high volume of construction starts may not be overbuilding. It is all about size, and larger markets will simply attract more construction-focused capital. Looking at the relative investor commitment to placing capital in construction versus existing assets can provide a sense of which markets face headwinds from construction.

Manhattan, for instance, does have the most capital committed to construction, with starts totaling $16.8 billion in 2018. This figure, though, is less than a third of total capital committed to Manhattan. By contrast, the NYC Boroughs, Miami/Dade County, and Kansas City have each had just as much capital committed to construction over the last 12 months as committed to existing assets.

1903 US construction markets COTW MAIN_300-01

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Jim Costello

Jim Costello

Senior Vice President

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.