Image: One World Trade Center construction
One World Trade Center, rises above the transportation hub in New York.
updated 3/29/2012 8:13:12 AM ET 2012-03-29T12:13:12

Thanks to the housing bubble, Phoenix garnered a reputation for dusty abandoned homes and half-built tracts of retail sprawl. Arizona’s biggest city suffered a 55 percent drop in home prices since the 2006 peak and it consistently ranks among the country’s 20 worst cities in terms of foreclosures. Yet a recent rebound in home sales — and more modestly in home prices — has spurred talk of a recovery there.

Turns out that budding rebound extends out into overall construction, too. In 2011, the Phoenix metro area welcomed a 41 percent increase in new construction, totaling $5.3 billion in new starts for both residential and non-residential building projects.

“In the case of markets that were categorized by the housing boom and bust, that [construction] correction has already occurred,” explains Robert Murray, vice president of economic affairs at McGraw-Hill Construction, a New York City-based construction data firm. “Now areas like Phoenix are in the process of seeing an upturn in new structures — that aren’t even necessarily housing.” slideshow: See the American cities with the most construction underway

In Phoenix, that construction spending jump comes in part from a new $5 billion Intel semiconductor manufacturing facility for which $1.5 billion worth of building began last year. The up-and-coming facility, located outside of city limits in nearby Chandler, Ariz., helped thrust the Phoenix Metropolitan Statistical Area into the No. 8 spot on Forbes’ list of the American Cities with the Most New Construction.

To compile our list, the folks at McGraw-Hill Construction sorted through building data for the nation’s Metropolitan Statistical Areas (MSAs) to find the 20 places where the most money was spent on new construction in 2011. MSAs, geographic entities defined by the U.S. Office of Management and Budget, include the cities for which they are named as well as the surrounding suburbs.

We looked at the dollar amount of new construction starts, or projects where ground has been broken and work begun, for structures that fall under the “Total Building” umbrella. Total Building includes single-family home construction, multi-family home construction, office space, retail space, warehouses, healthcare facilities, educational buildings, manufacturing plants and research facilities. We did not include money spent on public works projects such as bridges, streets and parks, nor did we include electric utility construction.

We honed in on construction starts because they are a leading indicator of economic activity and one that is commonly used by builders, developers and economists. Even so, it’s worth noting that tracking construction by starts is hardly foolproof, as work can begin on a project and still stall–if a developer loses their financing, for instance.

“There were a substantial number of projects deferred in 2008 and 2009 but those cases are much less so today, looking at 2010, 2011, and now in 2012,” Murray says.

Also worth noting: At the metro area level, spending can fluctuate from year-to-year. Mega developments (such as the new Intel facility) can run the risk of creating annual spikes in local spending numbers. (Note: If the new facility had not broken ground last year, Phoenix would still have made our top 20 cities list.) “Metro areas can bounce around a bit … but there are going to be more pluses than minuses in 2012 — just very small in scope,” cautions Murray.

Construction activity in nearly every market across the country took a nose dive with the economic downturn. It has remained moribund since, thanks to an overhang of vacant inventory, a weak jobs market, and the fact that in many cases, banks have balked at loaning to residential and commercial builders. New construction projects totaled $421.4 billion in 2011, down nearly 40 percent from the $689.3 billion logged during the 2006 peak. Even so, McGraw-Hill Construction projects a 7 percent national increase in new construction for 2012.

Coastal cities fare the best in terms of new projects.

New York City lands No. 1 on our list, with $17.2 billion’ worth of new construction in 2011. New York is home to one of the country’s biggest construction projects, the 16-acre, seven tower World Trade Center site that has bolstered Big Apple construction spending for years now. But last year it was joined by another large site, Gotham West, a massive $520 million residential project on Manhattan’s Far West Side slated for completion in 2014. The neighborhood will continue to rack up construction spending into 2012 and beyond too, since Hudson Yards, the $12 billion mega development a few blocks away is slated for the first phase of ground-breaking later this year.

“New York was, to some extent, able to buck the recession given some very large projects that had reached the construction start stage,” says Murray, noting that construction of multifamily buildings has accounted for much of the Big Apple’s activity.

Most of our list is comprised of coastal cities, including Boston (No. 6), Los Angeles (No. 7), Seattle (No. 9), and Atlanta (No. 10).

Another state welcoming new building is Texas. The Lone Star state accounts for three cities on our list: Dallas (No. 2), Houston (No. 3), and San Antonio (tied for No. 15). “Texas metro areas are drawing some benefit from the energy sector,” explains Murray. Dallas logged $9.5 billion in new starts last year and McGraw-Hill projects a 9 percent increase in 2012; Houston logged $8.8 billion, with an 8 percent increase expected in 2012. San Antonio welcomed $3.3 billion in new starts in 2011 and the same level of spending is expected this year.

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