Other metro areas included Atlanta , New York , Washington , D . C ., and Austin , Texas .
D ’ Esposito adds development in life sciences and health care to the list , “ but that tends to be more clustered ” in markets such as Boston , San Diego , and the Bay Area , he says . “ Where it ’ s busy , it ’ s extremely busy .”
Other sectors are seeing activity for more focused needs . While overall office construction slowed , projects related to temporary health measures — social distancing , sanitation accommodations , etc . — retrofitting projects , and other requirements were still necessary as people returned to office from working remotely . D ’ Esposito sees potential buildouts where companies take a critical look at their office spaces as hybrid home-office working arrangements become more common . “ What are the long-term shifts going to be in terms of how people work ?” he asks . “ A lot of companies view moving toward a hybrid model where they need flexibility in how the office is used , rather than a sea of desks .”
Overall , the top 2021 U . S . markets for commercial and multifamily starts , according to Dodge Data & Analytics data , are New York-Northern New Jersey- Long Island ; Dallas-Fort Worth-Arlington ; Washington-Arlington-Alexandria ; and Boston- Cambridge-Quincy .
LEGAL ISSUES The pandemic has made its mark on how construction contracts are being written going forward . “ Everybody up and down the
BUILDING SOMETHING NEW
chain is still very focused on force majeure provisions and standard force majeure delays , which typically have included epidemics ,” says Deborah Cazan , a construction attorney and a partner at Alston & Bird in Atlanta . “ In drafting new agreements , you have to consider that we ’ re not living in the same world that we were in three years ago . So those force majeure provisions look very , very different now than they did three years ago . In particular , a real hot button right now is whether material delays and escalation constitute a force majeure event .
“ Traditionally , material escalation and delays were put into the contractor ’ s bucket . That was the contractor ’ s risk because they had control over that . They determined when they were ordering materials [ and ] the price they negotiated with their vendors . They were the appropriate party to take that risk . That is no longer the default . What you ’ re seeing now is parties coming up with innovative ways to reallocate the risk so that the contractor isn ’ t taking the risk for material delays and escalation over which they have no control , and the owner isn ’ t taking the risk for those items over which the contractor does have control . Control is obviously going to be the focus in drafting provisions going forward .”
Top Metros for Commercial and Multifamily Construction Starts
2018 2019 2020 2021
2019-2020 YOY
2020-2021 YOY
New York 16,552 15,262 11,656 12,582 -23.6 7.9 Dallas-Fort Worth 3,770 3,859 4,006 4,473 3.8 11.7 Washington , D . C . 4,749 7,205 4,591 4,250 -36.3 -7.4 Boston 3,698 4,310 2,945 3,950 -31.7 34.1 Miami-Fort Lauderdale 4,955 3,459 2,787 3,515 -19.4 26.1 Los Angeles-Long Beach 3,359 3,851 4,410 3,447 14.5 -21.8 Philadelphia 1,873 2,772 1,778 3,306 -35.9 85.9 Seattle-Tacoma 3,409 2,101 2,023 3,247 -3.7 60.5 Atlanta 2,110 3,547 2,499 2,546 -29.5 1.9 Austin , Texas 1,869 2,792 2,549 2,539 -8.7 -0.4 Phoenix-Scottsdale 1,591 1,518 2,778 2,496 83.0 -10.2 San Diego 969 844 826 2,237 -2.1 170.8 Houston 2,818 3,882 3,092 2,174 -20.4 -29.7 Denver 1,681 1,383 1,291 2,124 -6.7 64.5 Nashville , Tenn . 1,051 2,477 1,277 1,959 -48.4 53.4 San Francisco-Oakland 2,829 2,574 903 1,931 -64.9 113.8 Chicago 3,057 3,301 4,189 1,911 26.9 -54.4 Minneapolis-St . Paul 1,396 1,627 1,016 1,736 -37.6 70.9 Kansas City 1,718 1,065 1,028 1,640 -3.5 59.5 Orlando , Fla . 1,618 1,833 1,384 1,531 -24.5 10.6 Total 65,072 69,662 57,028 63,594 -18.1 11.5
Source : Dodge Data & Analytics
While overall office construction slowed , projects related to temporary health measures , retrofitting projects , and other requirements were still necessary as people returned to office from working remotely .
She adds that she ’ s seen many ways in which clients have handled the situation in the past year . “ I ’ ve had some owner clients write into their agreement that , broadly speaking , unless the contractor is negligent in what it ’ s doing , the owner is open to change orders for increased material costs .” Other clients concerned about the availability and price uncertainty of a commodity like steel may pay 100 percent of their steel costs upfront to lock in the numbers .
“ I ’ ve had other clients who have written into their contract that if material costs go up more than 5 or 6 percent , then we ’ ll okay a change order ,” Cazan says . “ But you ’ re going to take the risk up to that , and in conjunction with that , if they go down by more than 6 percent , then we want money back .”
She notes that COVID-19 has also added additional work-site safety measures that have increased construction costs . For projects that were ongoing during the outbreak , “ contractors and developers were very good about working together to be fair about that ,” she says . However , as such requirements become more standard , contractors will now need to include them in their contracts .
Cazan says that she hasn ’ t seen the construction labor shortage shift risk to owners from contractors . Instead , owners and developers expect contractors to develop appropriate schedules based on their knowledge of the local labor market . “ It might be that your project is going to take longer , but that additional time needs to be built into the initial schedule ” she says . So , while the shortage may have an impact , “ the risk of a labor shortage isn ’ t typically being shifted to the owner or serving as the basis for a time extension .”
Sarah Hoban A business writer based in Chicago
CIREMAGAZINE . COM COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE 23