By Greg Cornfield – Commercial Observer
Apr 19, 2021
Los Angeles is pushing dirt in 2021.
The construction market in L.A. — the second largest in the U.S. — is expected to see modest growth this year, mostly driven by the residential sector, according to a report from Cumming project management and cost consulting, which covered the national building sector. L.A. is doubling down on public infrastructure, as eight of the 10 largest projects in the city are extensions of a freeway or Metro system.
The market’s anticipated growth is propelled by residential construction, most of which is single-family, but multifamily projects are making up a larger share every year, according to Cumming’s market analysis. The city’s total construction market volume, as measured by construction value, is anticipated to increase 2.9 percent this year after a 0.8 percent decrease in 2020, bolstered by a 15 percent jump in residential construction.
L.A. also currently has a larger office pipeline than Manhattan, with 6.9 million square feet of office space set to come online this year. Total construction volume is anticipated to surpass $45 billion in 2021.
For L.A. and Orange counties, the list of the highest-valued projects include Angel Stadium of Anaheim at $3 billion; the $1 billion North Hollywood transit hub; and Lendlease’s $600 million project at 3401 South La Cienega Boulevard.
Growth in the overall market is expected to plateau in the near future, but “this is deceptive,” according to Cumming, as analysts expect the market to remain strong and stable, rebounding from the lull caused by the pandemic. Construction employment is nearly back to pre-pandemic levels after 6,000 jobs were added in March.
According to Cumming, cost indices for L.A. are both lower and less volatile than the rest of California, mainly due to cities like San Francisco driving costs up. Nationally, the construction industry is still “on tenterhooks as to the timing of the market’s return, but the overwhelming view is that it will return this year,” according to Daniel Pomfrett, vice president at Cumming.
“Residential is still leading the market due to pent-up demand and low mortgage rates,” he said in a statement. “Healthcare has also continued its steady growth … Materials have seen a noticeable uptick in pricing: in the period between this report and our previous one, many of the materials running at negative growth in pricing over the last 12 months have started to move into the positive.”
Nationwide, commercial real estate loans in the residential markets saw a continued plateau nationally at the end of the year, with $4.7 billion in real estate loans from all commercial banks. Loans associated with construction and development continued to see increases totaling a rise of almost 15 percent year-over-year, indicating market confidence and that projects will slowly come back online.