By Brian Johnson Finance and Commerce

With cranes towering over much of the landscape, the 13-county Twin Cities area closed out the first half of the year as one of the 20 busiest markets in the nation for commercial and multifamily projects, a new report says.

The Twin Cities saw $1.276 billion worth of commercial and multifamily construction starts from January through June, a 34 percent increase from the same period in 2017 and 18th-best among all U.S. markets, according to a report released Thursday by New York-based Dodge Data and Analytics. The report ranks markets by dollar volume of construction starts.

It’s also the metro’s best showing in 18 years for the time period between January and June.

Between 2000 and 2017, commercial and multifamily construction starts in the first half of the year ranged from a low of $243 million in 2009 to $951 million in 2017, according to Dodge.

The Twin Cities market was just below the Phoenix-Mesa-Scottsdale, Arizona market ($1.556 billion) and one notch ahead of Portland-Vancouver-Beaverton, Oregon ($1.132 billion).

New York-Northern New Jersey-Long Island was far and away the leading construction market with $16.14 billion worth of starts, according to Dodge. Eleven of the top 20 markets, including the Twin Cities, had year-over-year gains.

For all project types, from offices and manufacturing to government buildings and single-family houses, the Twin Cities saw $4.5 billion worth of construction during the first half of 2018, a 45 percent increase, according to Dodge.

Robert Murray, chief economist for Dodge Data and Analytics, cautioned against reading too much into the current report because it’s limited to the first half of the year and it doesn’t include every type of project.

“We are looking at a situation where there seems to be a fairly even mix between those metro areas that show increases and those that show declines,” Murray said in an interview. “The fact that Minneapolis-St. Paul is with the group showing increases speaks to the relative strength of the construction market there.”

The report is consistent with other data and anecdotal information from local industry sources, which point to a thriving construction market.

On a more cautionary note, experts warn that the industry’s labor shortage, wage pressures and the rising cost of construction materials could slow the momentum in the not-too-distant future.

For now, the industry is cruising along on all cylinders, said Robert Heise, president of the Associated Builders and Contractors of Minnesota and North Dakota.

“We are doing terrific,” Heise said in an interview Thursday. “The market is red hot. I don’t see any slowdown in 2018 and 2019 is looking good, too.”

Heise said he’s concerned that the ongoing shortage of construction trades people and higher costs for labor and building materials may catch up to the industry in 2020. But it won’t happen overnight.

“Right now things are in the pipeline and it doesn’t just turn off in one or two months,” Heise said.

The Twin Cities is the 14th-largest metro area in the country as measured by population, so the No. 18 position is slightly below that ranking.

With that in mind, the area is “kind of holding par,” said Don Kohlenberger, a construction industry consultant and president of Minnetonka-based Hightower Initiatives. “We are not necessarily overachieving relative to other marketplaces. And part of that speaks to our long-term experience of Minnesota not necessarily being an area that ‘over-booms’ [or] ‘over-busts.’”

Kohlenberger said the news could be even better if the industry had more workforce capacity.

Other recent reports show somewhat mixed results.

For example, building permits for new multifamily housing in the 13-county metro were up 14 percent from January through June, but planned multifamily units were down 13 percent, according to the Keystone Report.

By and large, builders are staying busy.

The Associated Builders and Contractors reported on July 31 that Minnesota’s construction unemployment rate was just 1.9 percent in June. Minnesota was tied with Iowa for the lowest rate in the U.S., behind only Idaho (1.7 percent).

Put another way, just about “everyone in the construction industry who can work is working,” said Heise.

Tim Worke, CEO of the Associated General Contractors of Minnesota, said the Dodge report is further evidence that the construction market remains strong.

“All indications appear to be that things are moving strongly,” Worke said. “Everyone is watching anxiously the tariffs and changes in commodity prices that go into construction inputs. But things appear to be holding fairly steadily.”

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