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D.C.'s 2018 Construction Starts Up 22% From Last Year, Rank 3rd In U.S.

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The potential of a looming recession as the U.S. enters the ninth year of its economic expansion is not slowing down developers in the D.C. region. 

D.C. construction cranes Capitol

Projects that started construction in the D.C. Metro area from January through May, including residential and nonresidential development, have a total estimated cost of $7.5B, a 22% increase over the prior year, a Dodge Data & Analytics report found. 

The region's five-month total ranks third in the U.S. behind New York City and Dallas-Fort Worth, though both of those markets decreased from 2017. Just three Metro areas in the top 10 experienced a rising pace of construction starts: D.C., Seattle and Miami. 

Nonresidential construction in the D.C. area, which includes office, retail, hotel, industrial, educational, healthcare, religious, government, recreational and data center projects, totaled $4.04B from January to May, a 39% increase from 2017. Residential construction, which includes single-family and multifamily projects, increased by 7% to $3.45B. 

The report's definition of the D.C. Metro area covers a wide geographic range, including the District and 15 surrounding counties in Maryland, Virginia and as far as the eastern tip of West Virginia. It includes similarly large regional areas for the other cities in the ranking. 

US Citizenship and Immigration Services
A rendering of the U.S. Citizenship and Immigration Services office at the Branch Avenue Metro

The largest project to break ground in the D.C. region so far this year was a $350M data center in Ashburn, followed by two projects in Prince George's County: the $320M regional hospital and the $245M U.S. Citizenship and Immigration Services office building. Four of the 20 largest projects to start in the region were Northern Virginia data centers, continuing the sector's rapid growth

"It has been a fairly healthy market relative to other parts of the country," Dodge Data & Analytics Chief Economist Robert Murray said of D.C. "The general reasons are that it has had a fairly stable employment base, we are seeing a pickup in government spending and have seen the start of several large, government-related projects and several large data centers in Northern Virginia, which is propping up the nonresidential building totals."

D.C. is bucking a nationwide trend of slowing construction growth. The total cost of U.S. construction starts from January through May decreased 5% year over year, Dodge's report shows, and more than half of the top 20 markets experienced a drop. Murray attributed the nationwide drop to a slowdown of multifamily construction, which had been a leading driver of growth this cycle. 

"A number of these markets that are seeing a pullback in activity are looking at a retreat from multifamily housing," Murray said. 

He said the D.C. region has not been immune to the multifamily slowdown, but its strong government and data center sectors have allowed its pace of construction to continue growing. He said those economic drivers should allow D.C. to remain healthy through a nationwide recession, which he said could come in the next two years. 

"D.C. might see a mild slowdown," Murray said. "But given the fact that its employment base is still stable, that it is still benefiting from new data centers and government office buildings, that a downturn when it ultimately comes should be comparatively mild."