In eight of the top 10 metropolitan markets, the dollar volume of commercial and multifamily construction starts decreased on a year-over-year basis, according to the latest Dodge Data & Analytics report, covering the first half of 2017. At the same time, nine of the next 10 metro markets (ranked Nos. 11–20) experienced start growth, indicating that smaller metro areas are “picking up the slack” from the deceleration under way in larger cities.

On the national level, commercial and multifamily starts totaled $87.5 billion in the first half of 2017, down 9% from the first half of 2016 but up 1% from the first half of 2015. The New York metropolitan area remained the top metro market by dollar volume of construction starts, at $10.5 billion in the first half of 2017, down 22% from one year ago. Other metropolitan areas in the top 10 that experienced double-digit declines in construction volume include Los Angeles (down 15%, to $4.4 billion) and Dallas–Fort Worth (down 29%, to $3.2 billion).

Robert A. Murray, chief economist for Dodge Data & Analytics, attributes the 9% drop in commercial and multifamily construction to the slowed pace of multifamily construction. In the first half of 2017, multifamily construction start volume fell 18%, while commercial building starts held steady year over year. “Multifamily housing served as the leading edge of the current construction expansion, and, increasingly, it looks like it reached its peak in 2016,” says Murray.

Much of 2015’s explosive multifamily construction start-growth volume stemmed from the imminent expiration of New York City’s 421-a tax program in early 2016, with an additional boost from foreign investment. Following the expiration of 421-a, New York’s multifamily housing starts fell by 29% over the course of 2016, and by 23% YOY in the first half of 2017. Similar surges in construction start volume occurred across the country in 2015 and 2016, which led to double-digit percentage decreases for the first half of 2017 in major metro markets across the country. These include Dallas–Fort Worth (down 57%), Boston (down 51%), Miami (down 43%), and Seattle (down 32%). On the other hand, San Francisco’s multifamily construction start volume rose, by 17%, followed by Washington, D.C., at 13%, and Atlanta, at 7%.

“Although it’s true that lenders are exercising greater caution towards multifamily projects,” Murray says, “more construction is taking place in those markets which have been relative latecomers to the expansion, and this is helping to limit the extent of the multifamily slowdown now under way at the national level.”