Contact: Cathy DelliCarpini-Kruse (212) 481-9230
Contact: Bud Perrone (212) 843-8068
NEW YORK, October 3, 2006 – Total construction spending in New York City will top $20 billion for the first time in 2006, and exceed $21 billion in 2007 and 2008, according to New York City Construction Outlook, an annual forecast and analysis prepared for the New York Building Congress. The report was released today at a Construction Industry Forum featuring Deputy Mayor Daniel L. Doctoroff.
According to the Building Congress report, which is based on an analysis of capital budgets, private sector development plans and other indicators, total construction spending in New York City will reach $20.8 billion in 2006, an 11 percent increase from 2005, when spending reached a record, non-inflation adjusted total of $18.8 billion.
“This marks the sixth installment in the Building Congress Construction Outlook series and never has the view been so positive. Each sector of the industry is demonstrating considerable strength, and each borough is experiencing considerable construction activity,” said Building Congress President Richard T. Anderson. “Given that World Trade Center construction activity won’t begin to peak until 2009 and that major development projects such as Atlantic and Hudson Yards are slated to commence in that time frame as well, it is quite possible that the building boom could continue unabated well into the next decade.”
The housing sector continues to perform at historic levels. Construction Outlook forecasts an average of $5 billion in spending and 30,000 new units annually between 2006 and 2008, which mirrors housing output for 2005. Just one decade ago, in 1996, the housing construction sector in New York City produced less than 8,700 new units on annual spending of less than $1 billion.
“The continued strength of the residential construction market is nothing short of extraordinary and proving to be much stronger and deeper than perhaps anyone imagined,” continued Mr. Anderson. “Despite rising interest rates and higher construction costs, the housing boom in New York City remains alive and well.”
With more than half of the City’s construction spending devoted to the maintenance and development of public infrastructure, such as mass transit, public schools, bridges, roads and tunnels, the government sector remains the largest overall contributor to construction spending. Spending by New York City and State, the federal government and regional entities, such as the Port Authority of New York & New Jersey, will reach $11.6 billion in 2006, a 16 percent increase from the $9.7 billion spent in 2005. The report forecasts public construction spending to reach $12.1 billion in 2007 and $13.2 billion in 2008.
Non-residential construction – which primarily encompasses private commercial development and also includes spending by private institutions – remains steady with approximately $4.3 billion forecast for 2006 (up from $4.1 billion in 2005). The Building Congress forecasts spending in this sector will reach $4.2 billion in 2007 before dropping to $3.47 billion in 2008 – although these numbers could rise given the anticipated construction of eight million square feet of new office space at the World Trade Center, the bulk of which will be underway by 2008.
Challenges
Ahead
While all indicators
are so strong as to
preclude a significant
decline in the forecast
period, the report
warns of significant
challenges faced by
the industry and the
City. Foremost is
the rising cost of
construction, which
historically has impacted
New York more than
other cities. Due
to rising demand for
labor and essential
building materials,
such as steel and
concrete, construction
costs currently are
increasing at a rate
of about one percent
per month, according
to the report.
The report also raises concerns about the logistical challenges that lie ahead. As is already happening at the World Trade Center, innovative delivery methods and coordination will need to be established to ensure that operations can be staged and materials delivered efficiently to sites throughout the five boroughs without overburdening local neighborhoods and businesses.
“With major developments and infrastructure improvements planned in all five boroughs, we are creating a kind of construction perfect storm,” noted Mr. Anderson. “What remains to be seen is whether the supply and demand of skilled labor and vital construction materials can be balanced, and the extent to which inflationary pressures and increased overall costs may dampen the enthusiasm of developers or threaten to overwhelm the funding for public projects.”
The New York Building Congress prepared Construction Outlook 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 full report can be viewed at http://www.buildingcongress.com/code/outlook/2006-2008-outlook.htm.
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.
