CRE Construction Slows

Late 2019 saw commercial real estate construction slow, reported Reis, New York.

Though final fourth-quarter completion figures were delayed, “even taking this delayed effect into account, we will still see a slowdown in all three major sectors in 2019,” Reis Economist/Data Scientist Hsiao-shan Yang and Economist Thomas LaSalvia said in the firm’s fourth quarter construction report.

The report noted 2019 saw a pullback in construction completions for all three major property types, multifamily, office and retail. “Completion figures had been on the rise since the recession and peaked in 2017 and 2018 for the retail and office sectors, respectively,” it said. Office sector completions decreased more than 15 percent to 41.5 million square feet last year and retail sector decreased 46 percent to 5.4 million square feet.

Both inventory growth and absorption were weak during 2019 and market fundamentals stayed flat, the report said.

New completions in the multifamily and retail sectors saw significant pullbacks compared to the third quarter and office inventory growth also slowed, Reis reported. But vacancies stayed relatively flat in the quarter across all three major sectors due to less than stellar absorption.

The apartment market saw 34,543 new units delivered during the fourth quarter, down more than 35 percent from the previous quarter, while the retail sector saw 0.7 million square feet of new completions, a 45 percent drop quarter-over-quarter. The office sector saw 13.7 million square feet come online, up 16 percent from the previous quarter but short of the previous quarter’s 20 percent growth.

The apartment sector saw 184,000 new units in 2019, down 30 percent compared to 2018. “ [But] we still expect to see a fair amount of additions to the market in the apartment sector in 2020, given planned construction for the year and delayed completions from 2019 that will be pushed off to 2020,” the report said.