BAM Key Details:
- A new StorageCafe report names the top 20 U.S. metros for real estate development—commercial, industrial, and residential—over the past decade.
- Fifteen of those metros are in the Sun Belt, with all but Tampa ranking higher than coastal megacities NYC and Los Angeles. Four midwestern metros are in the bottom quarter of the list, starting with Chicago at #16.
A new report from StorageCafe reveals the top 20 U.S. cities for real estate development over the past decade (2013 to 2022), covering commercial, industrial, and residential sectors.
Fifteen of those top 20 metros are in the Sun Belt, with the top five in Texas and three in Florida. Four are in the Midwest, starting with Chicago. New York and L.A. also made the list as leaders in multifamily construction.
Right now, there’s a record high of multifamily real estate in construction. And completing those projects is the best way to fight inflation and lower mortgage rates, according to Logan Mohtashami of Housing Wire.
Here’s what you need to know.
Commercial real estate development from 2013–2022
Here’s how real estate development has fared over the past decade in each of the four major commercial sectors:
- Self-storage has grown the most of all the commercial real estate sectors over the past decade. Construction activity leveled off in 2020, except in certain areas like New York City, where high demand for storage met historically low inventories, keeping the pace of construction intense during and after the pandemic.
- Industrial real estate has seen consistent growth from one year to the next. The square footage added over the last 10 years accounts for 13% of total real estate inventory. Nearly 496 million square feet of new industrial space was added in 2022 alone—the best year of that decade for new industrial construction.
- Office space construction decelerated in 2022 as the industry regrouped and reevaluated itself as remote work (full- or part-time) changed the need for brick-and-mortar office space. The most active year in the past decade for office space construction was 2018, while it fell to its lowest levels in 2022.
- Retail real estate has been on a clear downward trend from 2013 onward, which isn’t all that surprising with the decisive shift in consumer preference toward online shopping, reducing demand for brick-and-mortar retail stores.
Residential construction: Multifamily & single-family
Construction activity in residential housing has been intense over the past decade, but not enough to meet the national housing deficit of around 3.8 million units, according to Freddie Mac’s estimate.
Nationwide, over 8.3M building permits for single-family homes were issued, along with nearly 5M for multifamily units.
While the single-family sector is lagging with fewer permits for new homes issued in the past ten years than in any decade since the 1990s, the multifamily sector has ramped up to meet demand and is well-positioned to ease the nation’s housing issues—once they hit the market. Of course, this doesn’t help those who want to be homeowners rather than renters.
Over the past decade, the number of building permits issued for multifamily units grew by 47% compared to the prior decade (2003-2012) and by 37% compared to 1993–2002.
That said, we still have the issue of single-family new construction hitting the market with prices well above the median in most of the country—largely due to the exorbitant regulatory fees demanded of builders before they can even start digging.
Declining rents can only help so much. We need more single-family homes, and we need them at prices more people can afford.
In a recent Housing Wire article, Logan Mohtashami stressed the need for the accelerated completion of multifamily construction projects—which are now at a record high.
The best way to fight inflation and get lower mortgage rates is to get more apartment units finished, and so far, this has been slower than my tortoise Grundy…We need to ramp things up, and so far, it hasn’t been spectacular. The faster we get 5-unit construction finished, the better we can fight against inflation and get lower mortgage rates. Why is this the case? It’s because shelter inflation is the biggest component of CPI inflation at 44.4%, and you can’t have a 1970’s inflation boom without rents taking off.
With more 5-units under construction than at any other time in history, the faster those can hit the market, the sooner we can see some relief with overall inflation—and the sooner the Fed is likely to stop hiking the federal funds rate (assuming they don’t flinch when more Americans start losing their jobs).
Mohtashami warns that, as banking credit grows tighter and buyer demand cools, the economic sector could take a beating similar to the one it took in the 1974 recession.
Of the top 20 metros, 15 (80%) are in the Sun Belt
The StorageData report is based on its in-depth analysis of new construction in the 100 largest U.S. cities over the last decade (2013–2022). Data includes building permits for single-family homes and multifamily units, as well as new additions of square footage in the office, retail, industrial, and self storage sectors.
Based on its findings, the Sun Belt region in particular has been tremendously active with real estate development. Fifteen of the top 20 metros ranked by volume of real estate construction from 2013 to 2022 are Southern or Southwestern Sun Belt hotspots.
The top 20 cities for real estate development:
- Houston, TX
- San Antonio, TX
- Austin, TX
- Fort Worth, TX
- Dallas, TX
- Phoenix, AZ
- Jacksonville, FL
- Las Vegas, NV
- Denver, CO
- Oklahoma City, OK
- Orlando, FL
- Atlanta, GA
- Nashville, TN
- New York City, NY
- Tampa, FL
- Chicago, IL
- Los Angeles, CA
- Omaha, NE
- Indianapolis, IN
- Columbus, OH
The top five metros are all in Texas, with Houston at #1
Texas alone has the top five metros for new real estate construction. As a prime migration destination for Americans—especially those leaving pricey West Coast metros—Houston, the #1 metro on the list, has stepped up its new construction game to meet rising demand.
Aside from the steady influx of new residents, Houston’s strong job market and diversifying economy are keeping both residential and commercial construction in a good place.
The top five Texas markets for new construction:
- Houston recorded the largest number of single-family home permits (roughly 55K) along with nearly 90K permits for new apartments. It also ranks first for industrial real estate development and second for office space construction. Self-storage also saw impressive gains to meet the personal storage needs of the growing Houston population.
- San Antonio ranked at number two thanks to its thriving industrial, single-family, and self storage construction sectors, as well as an innovative economy rooted in manufacturing and international trade.
- Austin, as a popular tech hub, has seen impressive gains in apartment construction to house all the business professionals coming in (mainly) from the West Coast. Nearly 99K building permits for multifamily construction were issued over the past decade—a number surpassed only by NYC and Los Angeles.
- Fort Worth, barely outperforming Dallas, registered a healthy 50K building permits for single-family homes over the past ten years—second only to Houston—along with nearly 37K permits for new apartments.
- Dallas added over 31M square feet of industrial construction—the most spectacular increase nationwide—while also issuing 69K new permits for apartment construction to meet renter demand
Three of the top 20 are in Florida
Florida metros take up three spots on the top 20 list, with Jacksonville leading at #7, Orlando just over the halfway point at #11, and Tampa wrapping up the third quarter at #15.
Five hottest Florida markets for new construction:
- Jacksonville issued nearly 37K single-family home permits over the past decade—the fourth highest among the 100 cities analyzed—along with roughly 28K permits for multifamily units. About 18.7M square feet of industrial space were also added.
- Orlando, while the smallest of the 20 in terms of population, outperformed NYC, LA, and Chicago for real estate development, issuing 9K permits for single-family homes and 20K for new apartments—and adding nearly 22M square feet of industrial space, 8.8M square feet of retail space, and 3.3M square feet of self storage.
- Tampa issued over 10K building permits for single-family homes and 21.5K for multifamily units—and added over 10M square feet of industrial space, 3.7M of office space, and 2.1M of self storage space.
- Miami issued 45.8K permits for multifamily units and added 4.7M square feet of industrial space and 9.1M square feet of retail space.
- St. Petersburg issued 9.7K multifamily permits and added 1M square feet of retail space and 975K square feet of self storage space.
Coastal megacities NYC and LA lead in multifamily construction
New York City and Los Angeles rank at #14 and #17, respectively, each maintaining their reputations as real estate hotspots. NYC led every other city in the U.S. in terms of new apartment permits, issuing more than 238,220 over the past decade.
Over the past ten years, Los Angeles has embraced the challenge of narrowing the housing gap by supporting residential construction. By issuing over 116K permits for new apartments, LA ranks second only to NYC in multifamily development.
Unlike NYC, though, LA has also been adding to its single-family inventory, registering about 22K permits for single-family homes—the 8th highest in the U.S.
As to whether buying or renting is more affordable, as of 2023, the gap between monthly mortgage payments and the typical LA rent stands at $2,802. So renters spend nearly $3,000 less a month on housing than home buyers.
Chicago leads midwestern metros in real estate development
Ranking at #16, Chicago, IL, is the first Midwestern metro to reach the top 20, having made significant progress in office, multifamily, and self storage construction.
Top five Midwestern cities for real estate development;
- Chicago, IL registered nearly 59K permits for apartments—the 7th highest nationwide—and also ranked 7th for self storage, adding 4.1M square feet of space, as well as over 21M square feet of office space.
- Omaha, NE ranked 18th on the list, registering just over 14K permits for single-family construction and the same number for multifamily units—and adding 7.9M square feet of industrial space, 4.1M of office space, and 1.2M of self storage space.
- Indianapolis, IN, at #19, issued just over 9K building permits for both single-family homes and multifamily units—and added 15.7M square feet of industrial space (3M in 2022 alone) and 1.9M square feet of self storage space.
- Columbus, OH, rounding out the top 20, registered almost 37K building permits issued from 2013 to 2022 for new apartments, while adding 7M square feet of office space, 4.2M of retail space, and 1.5M of self storage space.
- Kansas City, KS registered 15.8K building permits for multifamily units and added 13M square feet of industrial space and 1.5M square feet of self storage space.
Read the full report on StorageCafe for more details.
Takeaways for real estate agents
If you serve one of the top 20 metros for real estate development—and especially one of those leading the rest in terms of single-family building permits—keep an ear to the ground to keep tabs on the progress of new developments in your area and the estimated prices for each.
Meanwhile, do what you can in your community to advocate for and support policies and initiatives that would remove the regulatory fees that make new homes less affordable—as well as incentivize the construction of affordable homes.