Dallas-Fort Worth is one of the country’s top commercial building markets – even with a decline in starts from a year ago.
During the first half of 2023, almost $6.7 billion in commercial and apartment buildings started in North Texas, a 17% drop from a year earlier, according to Dodge Data & Analytics.
D-FW ranked second behind New York City among U.S. metro areas with the most commercial building activity this year.
“The wind has gone out of the sails for the commercial and multifamily sectors,” Richard Branch, chief economist for Dodge Construction Network, said in the new report. “Starts are likely to worsen still in the second half of the year, as interest rates head even higher.
“Tighter financial conditions and significant market shifts have led to precipitous declines in starts across many metropolitan areas,” he said. “However, even as markets begin to recover next year, significant structural change in the sector could lead to a tepid recovery with levels well below what was seen before the pandemic.”
D-FW commercial construction starts this year are still more than twice what they were in 2019 before the pandemic, according to Dodge’s estimates.
North Texas builders started a record $16.7 billion in commercial and multifamily projects in 2022.
Houston ranked fifth in the country with $4.7 billion in starts. Commercial construction activity in Houston was up 29% in the first half of the year.
Year-to-date through June, U.S. total construction starts counting residential were 5% below that of the first half of 2022, according to Dodge Data.
“High interest rates and tightening lending standards are leading to uncertainty among owners and developers, also creating hesitation among stakeholders, leading them to carefully assess whether projects will break ground,” Branch said in a statement. “These conditions will persist through the remainder of the year — meaning little forward motion in construction starts.”
Dodge Data reports that one of the country’s biggest building starts so far in 2023 was the $625 million first phase of the GlobiTech Semiconductor plant in Sherman north of Dallas. And Wells Fargo started its $500 million office campus in Irving.
D-FW leads the country in apartment construction with more than 70,000 units under construction.
The slowdown in commercial building in North Texas was expected as developers have cut back on starts, particularly in the troubled office building sector.
Builders are breaking ground for additional D-FW industrial and apartment projects.
While commercial building starts have slowed from last year, there’s been an even bigger decline in sales of commercial properties. Those were down almost 70% in the first half of 2023.
Source: The Dallas Morning News, Steve Brown, real estate editor, July 28, 2023.