New York City construction spending has remained stable over the past two years, after declining by double digit percentages in the aftermath of the 2008 financial crisis, according to New York City Construction Outlook 2011-2013, an annual forecast and analysis prepared by the New York Building Congress.
The Building Congress anticipates continued stability in 2012 followed by a steep loss in jobs and spending in 2013.
The Building Congress predicts that New York City construction spending will reach $27.7 billion in 2011, a one percent decline from 2010, when spending reached $28.0 billion, and an 11 percent decline from a peak of $31.0 billion, reached in 2007.
Construction activity is expected to reach $27.3 billion in 2012 – before dropping to $23.0 billion in 2013, a decline of 17 percent from 2011.
Construction employment is forecast to average 106,900 jobs in 2011, down from 111,800 in 2010 and off 19 percent from its 2008 peak of 132,600. While the Building Congress expects modest job growth – to 109,100 – in 2012, it projects alarming job losses in 2013, when employment could total just 91,800 jobs. If the forecast holds, the industry will have shed more than 40,000 jobs (or 31 percent of the 2008 workforce) over a five year period.
“The current and forecasted employment numbers illustrate quite vividly the real life implications of the economic downturn on New York City and our industry,” said Building Congress president Richard T. Anderson.
“As bad as the job losses have been to date, 2013 could be a painful year for a lot of local families if our employment projections hold.”
The Building Congress estimates that government spending, which includes investments in mass transit, public schools, roads, bridges and other essential infrastructure, will reach $14.4 billion in 2011, down from $16.1 billion in 2010 — a 10% drop.
Based on a review of agency budgets and projected commitments, expenditures in this sector are programmed to continue declining — to $12.7 billion in 2012 and $9.6 billion in 2013.
Spending by the City of New York, which is the single largest purchaser of construction work, is projected to decline by 45 percent between 2010 and 2012.
The Metropolitan Transportation Authority (MTA) may experience a short-term bump in its capital spending — from $4.5 billion in 2010, to slightly more than $5.5 billion annually in 2011 and 2012. However, with no big commitments slated for 2013, MTA capital spending is projected to decline dramatically to $2.4 billion in 2013.
“The resiliency of government infrastructure investment has been a reassuring surprise in the aftermath of the Great Recession,” noted Building Congress Chairman Peter A. Marchetto.
“In addition to preparing the region for future growth, public sector spending has largely carried our industry in recent years. The momentum has recently shifted, however, as City and State governments face growing deficits and with the federal government focused on debt reduction.
“It looks increasingly likely that our industry will need the private sector to pick up the slack, if we are to maintain a stable construction market in the coming years.”
Non-residential construction, which includes office space, institutional development, sports/entertainment venues and hotels, likely will reach $10.4 billion in 2011, up from $9.6 billion a year ago. Spending in this sector could increase further in 2012, to $11.3 billion, before falling to $9.8 billion in 2013.
The non-residential sector has been buoyed in large part by the ongoing World Trade Center redevelopment, the billions being spent on Madison Square Garden and Barclays Arena, as well as expansions by private institutions such as Weill Cornell Medical College, the Whitney Museum and Fordham University.
Anderson added, “While the 2012 outlook for the nonresidential sector appears solid, the big question is what happens as a number of mega-projects near completion in 2013. The good news is that some 20 million square feet of major office construction is on the drawing board and can move into construction quickly, if and when the City’s economy improves.”
The residential sector, while remaining far below the peaks reached from 2005 through 2008, appears to have bottomed out in 2010 and is now in the early stages of a slow but steady rebound. Total residential spending will reach $2.9 billion in 2011, which is up 24 percent from $2.3 billion in 2010.
The Building Congress forecasts further increases in residential spending, to $3.2 billion in 2012 and $3.5 billion in 2013.
That industry should produce approximately 10,700 dwelling units this year, according to the NYBC, followed by 11,000 in 2012 and 11,500 in 2013.
This is a considerable improvement over 2009 and 2010, when between 6,000 and 7,000 units were constructed annually. However, it is far from the period between 2005 and 2008 when New York City was building more than 30,000 new units a year.
Said Dominick M. Servedio, chairman of the New York Building Foundation, which co-sponsored the report, “An important function of the Foundation is to support research that can help the building community plan for a changing economy and help government and business leaders better understand the contributions of design, construction and real estate to the City’s growth and prominence.”
In its report, the Building Congress recommends the following steps:
• City and State government, along with the Port Authority, should unlock the potential for public-private partnerships (P3s) to provide alternative financing for upgrades to the region’s infrastructure. The most immediate needs include passing enabling legislation in Albany and initiating pilot projects, such as the Goethals Bridge or Tappan Zee Bridge replacements.
• The building industry and public officials representing downstate commuters must press to secure all elements of the MTA’s current proposal to finance the remainder of its five-year capital plan while assuring that the Regional Mobility Tax remains in place with all proceeds dedicated to capital improvements, as was the original intent.
• The industry must continue to make the case for the implementation of new, dedicated sources of infrastructure funding outside the normal budgeting process. Ideas that merit exploration include East River bridge tolls, congestion pricing, a gas tax increase and other user fees.
• The industry must continue to make the case with the Bloomberg administration and the City Council to maintain the City’s capital program at current funding levels.
• The Mayor and City Council should take affirmative steps to hasten completion of the nearly 650 stalled projects across the five boroughs in order to unlock their benefits more quickly.
• Government must continue to support major education, healthcare and cultural institutions as they move forward with critical expansion plans.
The New York Building Congress prepared New York City Construction Outlook 2011-2013 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.