Phoenix Ranked No. 2 – Tucson Ranked #24 in Top 50 U.S. Cites for Real Estate Development

(September 23, 2024) -- StorageCafe, analyzing data from Commercial Edge, the U.S. Census, and Yardi Matrix, is reporting that one constant across the U.S. over the past 50 years has been the cranes dominating our cities’ skylines. The real estate construction engine has been running at full speed, transforming our urban landscapes to meet modern lifestyle and economic needs.

However, growth is not equal, and some cities have surged ahead in the construction Olympics. To pinpoint where the most development is happening and which sectors are advancing most rapidly in the most significant U.S. cities, we turned to data from the U.S. Census and our sister research divisions, Commercial Edge and Yardi Matrix. We analyzed real estate activity across the U.S. from 1980 to 2023, covering six major sectors: single-family, multifamily, industrial, office, retail, and self-storage. Then, we zoomed in on the country’s top 100 largest cities to rank the most active real estate markets in the U.S. over the near half-century based on development volumes.

The construction scene in the US has always been bustling, but what we’re building today looks quite different from what was breaking ground when Millennials were born. Retail and office construction then dominated, with shopping malls as the anchors of social life. Today, there’s a noticeable shift towards urbanization, marked by significant growth in multifamily housing and a surge in self-storage and industrial spaces.

Doug Ressler, business intelligence manager at Yardi Matrix had this to say on the current state of the real estate development market:

“The multifamily sector, including apartment buildings and the more recent rise of built-to-rent communities, has consistently been a top performer in real estate. Urbanization and a growing preference for rental living, particularly among millennials and younger generations, have driven strong demand.... Meanwhile, the self-storage industry, though less prominent, has quietly expanded over the past 20 years. Driven by population growth and evolving lifestyles, it has become a significant and resilient player in the real estate market, often proving more robust during economic downturns than other sectors.”

More than four decades of growth: Southern and southwestern cities dominate real estate boom

South by Southwest is not just a unique arts and technology festival taking place annually in Austin, Texas, but also a very apt way of describing the country’s regions that have experienced fulminant real estate growth since the 1980s. An impressive 15 of the top 20 cities most active for real estate development between 1980 and 2023 are southern or southwestern cities. Furthermore, Texas and Florida are playing in a league of their own, with five and four cities, respectively, among the top 20.

These regions have attracted businesses and residents for decades, with their lower cost of living, favorable tax environments, and robust job markets in sought-after industries like technology, energy, and health care. Population growth has fueled housing demand and economic growth, eventually leading to a boom in residential and commercial real estate projects. Additionally, significant infrastructure investments and urban planning initiatives have facilitated the development of modern amenities and transportation networks, further enhancing their appeal.

The most active decade for single-family construction in the last 50 years was 2000–2009, when no fewer than 11.9 million building permits were issued. However, the pace almost halved in the decade starting in 2010, right after the Great Recession technically ended. The aftermath of the 2008 housing market collapse extended into the following decade through credit freezes and risk-averse behavior from both the real estate industry and the population, significantly suppressing construction activity during the 2010s.

Between 2010 and 2019, approximately 663,000 single-family homes were permitted annually, totaling 6.6 million for the decade. This period of low construction activity continues to impact the housing market today, leading to high home prices and limited availability.

As a silver lining, the 2020s are seeing a comeback in single-family home construction. The annual average for building permits is now close to 1 million, showing renewed interest in the sector.

Among the locations that are strongly pushing forward, southern hubs carry the torch in single-family home construction, with nearly all of the top 20 performers located in the South. Phoenix, AZ, leads the way with an impressive 215,000 single-family homes permitted between 1980 and 2023, followed by Houston, TX, and Jacksonville, FL.

Meanwhile, the multifamily sector is stepping in to fill the gaps left by the slower single-family construction, aiming to meet the housing needs of a growing population. The current decade is the best-performing multifamily construction period among the five analyzed decades. Since 2020, the average annual number of apartments permitted has been around 603,000, a 56% increase compared to the 2010s. The only decade that comes close in multifamily construction is the 1980s, while the 1990s saw the lowest number of permits.

New York City leads in the sheer volume of multifamily building permits issued between 1980 and 2023, with almost 680,000. Los Angeles, CA, ranks second, followed by Houston, TX, which excels in multiple categories.

Currently, self-storage is seeing double the annual completions compared to the 1980s

As the youngest real estate sector, it’s no surprise that the self-storage industry delivered 91% of its total inventory, or nearly 2 billion square feet of space, post-1980.

The 2020s are shaping up to become the best decade for self-storage construction. Current deliveries amount to over 64 million square feet of new space added annually, surpassing the annual peak of 55 million square feet recorded in the 2000s.

The current boom in self-storage construction comes down to changes in how we live, work, and move around, surging urbanization, and the increasing business and commercial use of the service. People accumulate more possessions and often need extra space to store them, especially in urban areas with smaller living spaces. The modern workforce is also more mobile, creating demand for flexible storage solutions that accommodate frequent relocations. Additionally, the self-storage industry has matured and become mainstream, often used as an extension of the home. Storage square footage is much cheaper than buying or renting larger living spaces, making it a popular choice for keeping homes less cluttered and more organized without breaking the bank.

The 2000s saw the highest overall volume of self-storage construction nationwide, almost 557M square feet in total, with the 1990s also delivering a respectable 430M square feet of new space. Major urban centers such as New York City, Houston, TX, and San Antonio, TX, led the nation in new self-storage deliveries, reflecting the high demand for these services in densely populated areas.