Building Construction Active for Close to Half a Century, But What’s Being Built Differs

A report from StorageCafe, “Top Cities for Real Estate Development: Sunbelt Cities Dominate Growth Olympics for Nearly Half a Century,” explained that real estate construction has boomed across the U.S. since 1980. However, “growth is not equal, and some cities have surged ahead in the construction Olympics,” the report said.

Specifically, as the report’s title suggested, southern and southwestern cities led the top 20 of the best cities for real estate development. Houston, TX, led the way, followed by Phoenix, AZ and San Antonio, TX.

Genesis and Methodology

“This research was driven by the need to understand the U.S. real estate development landscape, particularly in response to the population boom and significant economic shifts affecting the country,” Maria Gatea, author of the report, told Connect CRE.

The methodology examined U.S. real estate construction activity from 1980 to 2023 across single-family, multifamily industrial, office, retail and self-storage properties. The researchers then turned to the country’s top 100 largest cities and ranked the most active real estate markets over more than 40 years based on development numbers.

Gatea explained that analyzing real estate construction activity over time and trends across the key sectors ” gives us a clearer perspective on current challenges and opportunities.” This can help determine present needs and growth prospects while anticipating what sectors are best positioned for additional development and what regions will potentially dominate U.S. construction activity.

Changes by the Sectors

Back in the 1980s, construction was focused mainly on office construction and shopping malls. Fast-forwarding to 2023, there’s been a huge shift, with residential real estate (single-family and multifamily housing) reigning supreme. Even with 41 million single-family and 19 million multifamily units permitted between 1980 and 2023, “the total housing deficit in the U.S. is estimated to be around 3.2 million units,” the report said. The report noted that New York City leads in multifamily building permits issued over the past 43 years, followed by Los Angeles and Houston.

“Self-storage is also becoming an increasingly popular solution for people facing space constraints, particularly in large urban hotspots where smaller living spaces are common,” Gatea said. “The current decade so far is the most active for self-storage deliveries since 1980—over 64 million square feet of new space each year.”

Then, there’s the massive boost in industrial construction. “About half of the country’s industrial inventory was built after 1980,” the report said. “The current decade is seeing a veritable frenzy of industrial construction.”

Gatea noted that the 515 million square feet of industrial product delivered each year of the current decade is more than double the previous decade’s output. “This points us toward a manufacturing revival occurring across the country, as well as toward a growing demand for logistics hubs,” she observed.

What These Trends Portend

According to Gatea, the report results point to the following takeaways:

Housing continues to gain momentum. There’s little doubt that the housing shortage is a huge issue driven by population growth and economic changes. Developers have been stepping up, with nearly one million homes permitted annually since 2020. “While this marks definite progress, there’s still much to be done to meet the growing demand and to make housing more affordable,” Gatea said. Still, ongoing construction could help make homeownership accessible to more people, she added.

Consumer habits and business operations drive sector-specific growth. Growth in self-storage and industrial mirrors what’s going on among consumers and business owners. “As urban spaces become more condensed and living arrangements more transient, self-storage has emerged as a vital solution for individuals and businesses alike,” Gatea pointed out. Furthermore, e-commerce sales have increased demand for industrial space, specifically logistics and fulfillment centers.

Real estate’s future is in adaptable spaces. Gatea noted that traditional retail spaces have declined in many cities while new opportunities are emerging in mixed-use developments, including retail, residential and commercial. Meanwhile, a shift to hybrid work means that conventional office spaces will likely need to be reimagined.

Based on shifting consumer behaviors and business operations, “the demand for adaptable spaces will rise,” Gatea said. “Whether it’s integrating retail with office and residential units in mixed-use developments or designing industrial spaces that accommodate e-commerce growth, developers who anticipate and embrace these changes will be well-positioned for future success. “