By Sarah Trefethen
When it comes to the construction industry, the road to recovery could do with some repaving.
Construction starts in New York City declined 31 percent in 2011, according to a New York Building Congress analysis of McGraw-Hill Construction Dodge data.
At a breakfast seminar hosted by the building congress and NYU Schack Institute of Real Estate last week, Building Congress president Richard T. Anderson presented the results of the group’s analysis of the outlook for the sector. The 31 percent decrease in starts from the previous year was due primarily to a major decline in the non-residential building sector, where starts decreased 39 percent from $13.7 billion in 2010 to $8.4 billion in 2011.
Residential construction starts, on the other hand, jumped 24 percent, from $2.3 billion in 2010 to $2.9 billion last year.
“Given that 2010 was the year of the big-ticket construction project — with the World Trade Center, Madison Square Garden and Barclays Arena accounting for $6 billion in construction starts alone – it is not all that surprising to see a dip in 2011,” Anderson said.
“Still, the 31 percent decline in New York City is very troubling.”
Big projects such as Hudson Yards and the second phase of the Columbia Business School loom close on the horizon but have yet to hit the ground, said forum panelist Peter Marchetto, president of Tishman Construction Corporation in North America.
“They’re waiting. They’re waiting for tenants, they’re waiting for financing — they’re just waiting,” he said.
Diversification is a key to success in the current climate, Marchetto said. Health care and higher education are still strong, and infrastructure projects are also an option for companies that have traditionally worked on retail and commercial buildings.
“What we’re doing at Tishman is looking beyond traditional work,” he said.
Patricia Lancaster, a clinical professor at the Schack Institute, emphasized the importance of exploring and investing in new construction technologies, such as modular construction and new, lightweight but strong building materials under development in other parts of the world.
But David Burney, commissioner of the New York City Department of Design and Construction, called for a more optimistic take on the current climate, noting that the city’s commitment to infrastructure and the development of cultural institutions remains strong.
Telecommunication technology is giving more people the option of living away from cities, he said, making it more important than ever that cities invest in promoting quality of life.
Burney also said that bids from construction companies are coming in lower than before the recession, and the city is paying 25 percent less for contracts than it did in 2008.
“If you were to add that 25 percent to what we’re spending today, we would be ahead of the curve,” he said.
Interest rates, Burney reminded the audience, are also low. “Money is practically free, and bid rates have never been lower,” he said. “We should be borrowing and building now.”