HAMILTON, NJ – Total construction starts declined 25% from March to April to a seasonally adjusted annual rate of $572.2 billion as COVID-19 and economic recession hit the construction sector. In April, nonresidential building starts fell 37% from March, while residential dropped 25%. The decline in nonbuilding construction starts was more tepid, falling just 5% due to strong activity in streets and bridges.
On a year-to-date basis through four months of 2020, total construction starts were 8% lower than the same period in 2019. Nonresidential building starts were off 14%, while nonbuilding starts were down 15%. Residential starts, meanwhile, were up 2% on a year-to-date basis. Looking at starts from a slightly different perspective, total construction starts were 1% higher in the 12 months ending in April 2020 than they were for the same period ending in April 2019. Residential building starts were 2% higher, while nonbuilding starts were up 5% for the 12 months ending in April 2020. Nonresidential building starts, but, were down 3%. The Dodge Index tumbled to 121 (2000=100) in April from the 161 posted in March. This is the lowest reading of the Dodge Index since May 2014.
The April starts data is certainly sobering, but also very much expected, stated Richard Branch, Chief Economist for Dodge Data & Analytics. The near shuttering of the economy during April had a significant negative effect on the construction industry, leading to delays in both ongoing projects as well as those about to break ground. Even though parts of the country are beginning to reopen, and some areas that had paused construction are now restarting, it will be a very long road back to normalcy for the construction industry. Continued dread of a resurgence in the virus will lead to a continued reduction in economic activity over the coming months, affecting construction projects across the country. The economic and construction recoveries will remain sluggish until a vaccine or viable treatment becomes available.
Nonbuilding construction fell 5% in April to a seasonally adjusted annual rate of $156.6 billion. The utility/gas plant category dropped 52% during the month, but much of that decline was the result of very strong starts in March as several large projects broke ground. Environmental public works also fell in April, losing 3%. On the plus side, the miscellaneous nonbuilding category rose 9% and highway and bridge starts increased 26%. The largest nonbuilding projects to break ground in April were the $673 million I-10 project in San Bernardino CA, the $410 million US Route 101 project in Santa Barbara CA, and a $369 million road resurfacing project in Tallahassee FL.
Year-to-date through April, nonbuilding construction starts were 15% down versus the first four months of 2019. Starts in the highway and bridge category were up 5% through April but were down sharply for other nonbuilding categories. For the twelve months ending in April 2020, total nonbuilding starts were 5% higher when compared to the same period a year earlier. Starts in the utility/gas plant category were 60% higher, while environmental public works were down 5%. Street and bridge starts were 3% lower for the twelve months ending in April, while miscellaneous nonbuilding were down 14%.
Nonresidential building starts crashed 37% from March to April reaching a seasonally adjusted annual rate of $170.2 billion – the lowest monthly reading since early 2014. April s decline was much sharper than any single month-to-month drop seen during the Fantastic Recession. The severity of the decline was widespread. Commercial starts fell 47%, manufacturing starts dropped 56%, while institutional construction starts lost 26%. The largest nonresidential building project to start in April was the $950 million expansion of Portland International Airport. Also starting during the month were the $253 million Wildcreek High School/Procter Hug High School in Sparks NV and the $140 million Waddell & Reed headquarters tower in Kansas City MO.
As a result of the April data, nonresidential building starts were down 14% year-to-date. Commercial starts were down 18% year-to-date, while manufacturing starts were 34% lower and institutional starts dropped 6%. In the past twelve months, nonresidential building starts were down 3% from the previous twelve months. Commercial starts were down 1%, while institutional building starts were 3% lower, and manufacturing starts slid 5%.
Residential building starts went 25% lower in April to a seasonally adjusted annual rate of $245.4 billion. Over the month, single family starts dropped 21%, while multifamily starts lost 36%.
The largest multifamily structure to break ground during April was the $217 million Hanover Square & Bayou Apartments in Houston TX. Also starting during the month were the $140 million Modera New Rochelle Mixed Use project in New Rochelle NY and the $115 million Miami Urban Village Apartments in Homestead FL.
Through the first four months of 2020, residential construction starts were up 2% versus the same period of 2019. Single family starts were 8% higher, while multifamily starts were down 12% through four months. For the twelve months ending in April, total residential starts were 2% higher than a year earlier. Single family starts were up 4%, while multifamily building starts were down 2%.

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SALT LAKE CITY, UT – KBS, one of the largest investors in premier commercial real estate in the nation, announced that it has sold Hardware Apartments, a 463,956 square-foot, Class A luxury resort-style apartment community in the Salt Lake City real estate market. The property, owned by KBS Real Estate Investment Trust III, was sold in an off-market transaction to Oakmont Properties for an undisclosed amount.
KBS and Salt Development started ground-up construction on the 453-unit multifamily property in mid-2016 with the first phase of 267 units – Hardware West – being completed for the asset in June 2018. The sale was concluded shortly after Phase II was completed on Hardware East, which comprises the remaining 186 units of the community. Hardware Apartments is situated in Hardware Village adjacent to the historic Salt Lake Hardware Building, which is also part of the KBS portfolio.
The development project represents KBS extensive understanding of the Salt Lake City market and the firm s ability to leverage its deep expertise in markets throughout the country, according to Rod Richerson, regional president, Western United States for KBS.
We are very strategic about when and where we do ground-up construction but being active investors for well over a decade in the market we thought this would be a successful venture, says Richerson. We have several office assets in Salt Lake City, including the Salt Lake Hardware Building, 222 Main, Millrock Park and Parkside Tower. Considering how hard it is to close deals during the current economic environment this sale was a major accomplishment but we worked diligently with the buyer over the last couple of months to see it through. We hit a particular challenge when they lost their lender at the last moment so KBS provided small-term market rate seller financing to help Oakmont Properties complete the transaction.
Salt Lake City is an ideal fit with KBS proven strategy of investing in key growth markets nationwide with solid economic fundamentals, adds Tim Helgeson, asset manager for Hardware Apartments and senior vice president for KBS.
According to CBRE s office report in Q1 2020, the Salt Lake City-Provo office market absorbed 196,654 square-feet on net – a high for Q1 over the past two years. The abundance of incoming supply (over 3.0 million square-feet) with substantial preleasing reaffirms that there is still strong confidence in the Salt Lake-Provo marketplace.
Situated near the heart of downtown Salt Lake City, Hardware Apartments offer a distinct variety of penthouses, lofts, studios, one- and two-bedroom luxury apartments, townhomes and stunning brownstone row houses.
A state-of-the-art fitness center, yoga room, and a resort quality rooftop lounge with an infinity pool are among the luxury common amenities at the property, making it one of the highest-level amenities packages in the area, according to Helgeson.
This development s leading design and unparalleled urban finishes showcase the depth of attention KBS pays to every aspect of the properties in its client portfolio, says Helgeson. We have seen a ramp up in leasing tied to the recent completion of construction on the second phase of this unique community.
KBS partnered with local developer SALT on the development of this project. Hardware Village s ideal location, combined with KBS deep knowledge of the Salt Lake City market and unparalleled track record of successful properties in downtown areas throughout the country, encouraged us to partner with the firm on this project, says Thomas Vegh, president and CEO of SALT. KBS left no stone unturned in ensuring that Hardware Apartments would be a multifamily community of the finest quality in downtown Salt Lake City, which made the partnership a win-win for both companies.
Hardware Apartments is located steps from the TRAX light rail, Downtown Salt Lake City, Trolley Square and Liberty Park, and is connected to all major thoroughfares, employment centers, arts and entertainment in the Salt Lake City market. The property is within walking distance of restaurants, shops and retail stores.
We immediately recognized the value of this asset for its high-end amenities and prime location, says Ryan Ashley of Sacramento, California-based Oakmont Properties. Hardware Apartments is prominently positioned in the robust downtown Salt Lake City market to make an elegant living experience unlike any other in the area.
Attorneys Bruce Fischer, Tatyana Litovsky and Chrisdo Fan, and paralegal, Amanda Kennedy, of global law firm Greenberg Traurig, LLP s Orange County office represented KBS as legal counsel in the disposition.
We were very pleased to represent KBS in what was a truly a unique disposition of Hardware Apartments. said Fischer, Greenberg Traurig s Chair of the West Coast Real Estate Practice and Co-Managing Shareholder of the Orange County Office, who led the Greenberg Traurig team.
Hardware Apartments is located at 455 West 200 North in Salt Lake City, Utah.

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LOUISVILLE, KY – Four Mile Capital, a privately-held real estate investment firm based in Louisville, CO, has bought the Avalon Springs Apartments, a 141-unit multifamily community in Louisville, KY. Avalon Springs, built in 2018 and currently 99% leased, sits on nearly 18 acres of land. The property consists of 125 two-bedroom townhome units, each with 1,322sf of living space and their own private entrance and private patio, as well as 16 two- and three-bedroom flats, also with their own private patios. Lincoln Property Management, has been awarded the management contract.
The transaction closed on April 30, 2020 for $22,000,000, which equates to $156,000 per unit or $120 per square foot. As part of their acquisition, FMC placed a new 65% LTV mortgage with a fixed 3.14% interest rate for 10 years and five years of interest-only payments from Freddie Mac. The loan was originated through Newmark s Boston office led by Ed Belz.
Eric Mallon, one of FMC s Founding Partners, said of the Avalon Springs transaction, We re incredibly proud of this acquisition, completed during one of the most challenging economic environments we ve ever experienced and executed at our original contract price. Yes, the world had changed dramatically from when we went under contract on March 3, but given that we were purchasing the asset 5.5% below its appraised value and the overall quality of the property, we felt that asking for price reduction was akin to simply taking advantage of an already challenging situation.
Instead of re-trading the deal, as many investors are apt to do during times of economic strife, FMC negotiated an occupancy escrow, funded by the seller and to be used by FMC should Avalon s economic occupancy dip below 95% during FMC s first year of ownership. This was a win-win for FMC and the seller as it gave FMC and its investors peace of mind that any economic downturn experienced at Avalon Springs due to the impacts of the COVID-19 pandemic would be neutralized during its first year of ownership, while it also allowed the seller to realize a larger liquidity event, minimize potential economic loss due to selling in the middle of the pandemic and have certainty of close. We hope the manner in which we executed this transaction during these unprecedented times reinforces our reputation as a group that stands by and delivers on our word, even in the face of the most challenging of circumstances, Mallon continued.
Avalon Springs is located in a low-density residential area in South Jefferson County. It is approximately 20 minutes from downtown Louisville, 13 minutes from Louisville International Airport and just minutes from several of the major employers in the area including GE Appliances, Ford Motor Co., and UPS s global Worldport Hub.
The acquisition, FMC s first in the state of Kentucky, aligns with their initiative to expand throughout the south-central U.S. in markets that demonstrate a balanced outlook for stability and growth. We are thrilled to have completed our first acquisition in Kentucky, extending our geographical footprint from neighboring Virginia where we own nearly 700 units. We remain believers in the quality of life offered in the Southeastern U.S. and look forward to continuing to expand our presence in Kentucky, Virginia, North Carolina and expanding to additional states in the future, said Andrew Jumbeck, VP of Acquisitions for FMC.
The newer construction apartments, with unit interiors finished with granite countertops and stainless appliances, were delivered with no deferred maintenance or expected capital needs. FMC s business plot instead focuses on improving operations through the implementation of cutting-edge management and marketing strategies, utilizing their institutional-quality asset management platform to control operational expenses, push other income opportunities, and make strategic decisions for the asset. Avalon Springs, especially with its huge, highly sought-after townhome floorplans, is representative of the risk-adjusted return profile that we feel makes the most investment sense right now, especially heading into a recession. Because the property was completed only two years ago, costly and/or unknown capital expenditures are all but eliminated during the hold period. We were therefore able to make value right out of the gate by buying below replacement cost while still generating strong returns approaching those of traditional value-add executions, said Jumbeck.

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