Rubenstein Communications
Contact: Bud Perrone (212) 843-8068
New York, October 17, 2013 – Fueled by a resurgent residential market, anticipated progress at two mega-development sites, and ongoing government infrastructure projects, New York City construction spending and employment are poised for a return to the boom times of the mid-2000s, according to New York City Construction Outlook 2013-2015, an annual forecast and analysis prepared by the New York Building Congress with support from the New York Building Foundation.
The report estimates 2013 construction spending to reach $31.5 billion, a 14 percent increase from 2012 when construction spending reached $27.6 billion. Construction activity is expected to continue building momentum in the coming years—growing to $33.4 billion in 2014 and then $37.0 billion in 2015.
If the 2013 estimate of $31.5 billion is achieved, total construction spending would eclipse the previous high of $31.1 billion, reached in 2007—at least in nominal terms. With the effects of inflation factored in, 2013 spending would actually be about 15 percent below the 2007 peak in volume of work delivered.
If 2015 construction spending matches the forecast of $37.0 billion, however, the volume of work produced would be right in line with numbers at the height of the building boom, even factoring for inflation.
“New York City is once again demonstrating its remarkable resiliency,” said Building Congress President Richard T. Anderson. “Just five years after the worst downturn since the Great Depression, the City’s construction industry finds itself on the brink of yet another building boom.”
EMPLOYMENT
The Building Congress projects the addition of 4,200 new construction jobs in 2013—up to 119,100 from 114,900 in 2012. The forecast anticipates a total of 123,400 jobs in 2014, and 129,700 in 2015. If these benchmarks are realized, 2014 and 2015 would represent the industry’s second- and third-highest employment totals since at least 1995 – surpassed only by the 132,600 jobs reported in 2008.
RESIDENTIAL
The residential construction sector, which declined precipitously in the aftermath of the worldwide financial collapse in 2008, is continuing its remarkable rebound. Residential construction spending doubled between 2009 and 2012 and is expected to continue this surge by doubling yet again by 2015.
After rising to $5.3 billion in 2012, the Building Congress anticipates housing-sector construction spending to reach $7.5 billion in 2013, $9.0 billion in 2014 and $10.7 billion in 2015.
With all of this positive development, it must be noted that the production of new housing units is not keeping pace with the growth in spending. In 2012, New York City added 11,000 units of new housing on $5.3 billion in residential spending while in 2008, 33,000 new housing units were produced with $5.9 billion in spending.
Non-Residential
Non-residential construction, which includes office space, institutional development, sports/entertainment venues, and hotels, is forecast to reach $10.3 billion in 2013, up from $8.9 billion a year ago. Spending in this sector is expected to climb even further in the coming years—to $10.8 billion in 2014 and $13.6 billion in 2015.
The sector is being buoyed by current and anticipated additional work at the World Trade Center and Hudson Yards, as well as a number of large hotel projects and a series of significant ongoing expansions by New York City’s educational, healthcare and cultural institutions.
The Building Congress forecasts 2.9 million square feet of office space will be in construction in seven Manhattan office towers during 2014. Five of those towers, totaling 2.6 million of the 2.9 million square feet of new inventory, will be confined to the 16-acre World Trade Center and a portion of the West Side of Manhattan roughly bounded by 9th and 11th Avenues from West 30th to West 33rd Street. In 2015, these two neighborhoods are forecast to be the home of five of the six Manhattan office towers under construction and 3.7 million of the 3.8 million square feet expected to be built that year.
“Back in 2003, government officials unveiled ambitious master plans for both the World Trade Center and Hudson Yards. These proposals were predicated largely on billions of dollars in upfront government investments, which would pave the way for private sector investments,” said Building Congress Chairman John M. Dionisio. “After a decade, those ambitious visions and upfront capital investments are paying off.”
GOVERNMENT
Government spending, which includes investments in mass transit, public schools, roads, bridges, and other essential infrastructure, is forecast to increase from $13.4 billion in 2012 to $13.7 billion in 2013 before dropping back to $13.5 billion in 2014 and then $12.8 billion in 2015.
Decreased spending by the City of New York, which is perennially the largest single purchaser of construction services in the five boroughs, is driving the downward trend. Since peaking at $9.3 billion in 2007, City spending on the design and construction of capital projects has steadily declined. The Building Congress warns that the City’s design and construction spending could fall to $7.5 billion in 2013, followed by a drop to $7.2 billion in 2014 and $6.4 billion in 2015.
The Metropolitan Transportation Authority (MTA) is projected to spend about $3.7 billion annually between 2013 and 2015, which is in line with the MTA’s recent annual expenditures, though well below its peak of $5.1 billion in 2008. The third biggest government spender, the Port Authority of New York & New Jersey, is expected to hold steady at $1.8 billion annually throughout the forecast period.
The Building Congress report cautions that there is a fair amount of uncertainty in the government forecast. With a new mayoral administration and changes to the leadership of the New York City Council, shifting priorities could have an impact both on the size of the City’s capital budget as well as the mix of projects undertaken. The report also notes that the City’s own estimates for future spending often are lower than the final result.
“In the years immediately following the 2008 financial meltdown, New York City’s building industry was heavily reliant on public sector work,” said Building Foundation Chairman Frank J. Sciame. “In 2009 and 2010, government projects accounted for approximately 58 percent of all construction spending, but by 2015, government work is expected to account for just 35 percent of construction spending. While this is good news for the private sector outlook, it is troubling to see government spending so far off previous highs.”
Superstorm Sandy
The construction industry quickly mobilized after Superstorm Sandy to restore infrastructure, reopen commercial buildings, and begin the process of rebuilding the City’s coastal communities. This work has undoubtedly had an impact on the overall forecast. However, since most data sources, including labor statistics, building permits and some capital budgets, do not treat storm-related construction as a separate category, it is not possible to isolate and precisely quantify Sandy’s impact on Citywide construction spending and employment.
In addition, a wide range of government officials and task forces on the City, State, and Federal levels have analyzed the storm and are formulating recommendations to make the region’s infrastructure, economy, and residential communities more resilient in extreme weather events. Should a consensus quickly form on investment priorities, some additional Sandy-related projects are likely to be initiated and positively impact construction spending and employment during the forecast period.
RECOMMENDATIONS
The Building Congress offered the following recommendations in its report:
- All segments of the design, construction, and real estate industry should work together to ensure that infrastructure investment and the City’s economic future are priorities for the incoming mayoral administration.
- The building industry and public officials representing downstate commuters should identify—and vigorously advocate— additional sources of dedicated revenue to help fund the MTA’s next five-year capital plan, while continuing to support retention of the regional Payroll Mobility Tax. The MTA’s current capital plan, which extends through October 31, 2014, is fully funded, but no sources of new funding outside of federal formula money have been identified for the next capital plan.
- The industry and government should implement projects identified and recommended in the wake of Superstorm Sandy to improve the City’s emergency response capabilities and the resiliency of its vital infrastructure.
- The next mayoral administration and City Council should continue steps to spur office construction through initiatives such as the Midtown East plan.
- Government should continue to support major education, healthcare, and cultural institutions seeking to expand their facilities and programs.
The New York Building Congress prepared New York City Construction Outlook 2013-2015 with the assistance of Urbanomics, an economic consulting firm. It incorporates reviews of private construction data as well as public capital budgets and plans at the City, State and Federal levels. The New York Building Foundation, which is the philanthropic arm of the New York Building Congress, co-sponsored the report.
***
The New York Building Congress is a membership coalition of business, labor, association and government organizations promoting the design, construction and real estate industry in New York City.
The New York Building Foundation was formed in 1998 to complement the New York Building Congress through a program of targeted philanthropy, research and educational activities.
