The Southeast and Texas offer the most favorable conditions for commercial construction, claiming seven of the top 10 markets in CBRE’s inaugural Development Opportunity Index. CBRE’s Index analyzes a spectrum of variables in the 50 largest U.S. markets to determine rate the highest for development opportunities across various asset classes.
U.S. construction activity is expected to bounce back in 2021, after a slowdown in 2020 due to challenges brought by COVID-19, including temporary work stoppages and difficulty sourcing various materials from abroad. Since the start of the pandemic, momentum has varied across commercial real estate sectors – development largely progressed in the multifamily and industrial & logistics sectors, but activity slowed—and in some cases stalled—for retail, hotels and speculative office development.
“We expect to see an uptick tenant fit-out projects in 2021 as employers redesign and reconfigure spaces to accommodate new standards in health, wellness and safety,” said Jim Dobleske, CBRE Global President of Project Management. “Costs, however, aren’t likely to change much; markets with high costs of land and labor won’t get much cheaper, if at all.”
CBRE’s Development Opportunity Index ranks markets based on development conditions including property performance across each of the major commercial real estate asset classes, construction costs, strength of supply, prior and forecast performance.
“Southern states continue to rate highly for development and construction conditions, though investors looking for development opportunities can find them in every market,” said James Millon, a Vice Chairman in CBRE’s Debt & Structured Finance practice. “Southern states often have job growth, in-migration and cost advantages that drive high volumes of construction activity.”
An overall top-10 ranking doesn’t necessarily mean that market is among the best for every asset class.
For example, CBRE’s analysts ranked San Jose as the best positioned market for office construction due to its supply growth and strong absorption. Phoenix – reflecting its shrinking vacancy and strong absorption -- and San Francisco – with strong rent growth – also are attractive office markets for development.
For industrial & logistics construction, Atlanta ranks highest due to its balance of strong inventory growth and net absorption. Also ranking well are Phoenix because of its affordable land and labor, and Dallas due to its relatively low costs and strong population growth.
Houston tops the index of ideal markets for retail construction due to that market’s strong consumer spending and sustained absorption of retail space. Next are Dallas and Atlanta, which both offer stable costs and good absorption of retail space.
For multifamily construction, the top markets are Orlando, Phoenix and Denver. Each offers strong population growth, job gains and relatively low costs.
To download the report, click here.
Related Stories
Hotel Facilities | Aug 2, 2023
Top 5 markets for hotel construction
According to the United States Construction Pipeline Trend Report by Lodging Econometrics (LE) for Q2 2023, the five markets with the largest hotel construction pipelines are Dallas with a record-high 184 projects/21,501 rooms, Atlanta with 141 projects/17,993 rooms, Phoenix with 119 projects/16,107 rooms, Nashville with 116 projects/15,346 rooms, and Los Angeles with 112 projects/17,797 rooms.
Market Data | Aug 1, 2023
Nonresidential construction spending increases slightly in June
National nonresidential construction spending increased 0.1% in June, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. Spending is up 18% over the past 12 months. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.07 trillion in June.
Hotel Facilities | Jul 27, 2023
U.S. hotel construction pipeline remains steady with 5,572 projects in the works
The hotel construction pipeline grew incrementally in Q2 2023 as developers and franchise companies push through short-term challenges while envisioning long-term prospects, according to Lodging Econometrics.
Hotel Facilities | Jul 26, 2023
Hospitality building construction costs for 2023
Data from Gordian breaks down the average cost per square foot for 15-story hotels, restaurants, fast food restaurants, and movie theaters across 10 U.S. cities: Boston, Chicago, Las Vegas, Los Angeles, Miami, New Orleans, New York, Phoenix, Seattle, and Washington, D.C.
Market Data | Jul 24, 2023
Leading economists call for 2% increase in building construction spending in 2024
Following a 19.7% surge in spending for commercial, institutional, and industrial buildings in 2023, leading construction industry economists expect spending growth to come back to earth in 2024, according to the July 2023 AIA Consensus Construction Forecast Panel.
Contractors | Jul 13, 2023
Construction input prices remain unchanged in June, inflation slowing
Construction input prices remained unchanged in June compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics Producer Price Index data released today. Nonresidential construction input prices were also unchanged for the month.
Contractors | Jul 11, 2023
The average U.S. contractor has 8.9 months worth of construction work in the pipeline, as of June 2023
Associated Builders and Contractors reported that its Construction Backlog Indicator remained unchanged at 8.9 months in June 2023, according to an ABC member survey conducted June 20 to July 5. The reading is unchanged from June 2022.
Market Data | Jul 5, 2023
Nonresidential construction spending decreased in May, its first drop in nearly a year
National nonresidential construction spending decreased 0.2% in May, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.06 trillion.
Apartments | Jun 27, 2023
Average U.S. apartment rent reached all-time high in May, at $1,716
Multifamily rents continued to increase through the first half of 2023, despite challenges for the sector and continuing economic uncertainty. But job growth has remained robust and new households keep forming, creating apartment demand and ongoing rent growth. The average U.S. apartment rent reached an all-time high of $1,716 in May.
Industry Research | Jun 15, 2023
Exurbs and emerging suburbs having fastest population growth, says Cushman & Wakefield
Recently released county and metro-level population growth data by the U.S. Census Bureau shows that the fastest growing areas are found in exurbs and emerging suburbs.