Despite the ever-rising costs of construction in New York City, the New York Building Congress said in its latest report that the industry is still profitable.
“New York’s building industry is faced with particularly high costs of land and materials and continued burdensome regulations,” Carlo Scissura, NYBC’s president and CEO. “These factors were the primary drivers of cost increases in 2018. While the cost of construction is high, the rewards for doing business in New York have never been greater.”
Scissura pointed out that New York’s population and economy continue to grow and that there are still many opportunities to build in sectors like commercial, residential, healthcare, education, culture and infrastructure.
The faith in the industry’s profitability comes in the face of continually rising construction costs.
According to NYBC’s 2019 construction costs report, costs in New York City rose 5 percent last year—similar to the year prior—and remains the highest costing market to do construction in the US. The report added that the rise in construction costs has also been a constant since 2010.
The perpetual increase in construction costs can largely be attributed to the spikes in material costs, according to the report. Many important materials jumped in price in 2018, including diesel fuel costs skyrocketing 52 percent, lumber costs increasing 23 percent, copper pipe costing 14 percent more and structural steel commanding a nine percent increase in cost, the report said. In comparison, the report added that material prices from 2011 to 2016 have either stayed the same or declined.
And compared to other cities, constructing class-A office buildings in New York City is anywhere between 15 to 50 more expensive than other major US cities. Constructing an office building in the city can cost nearly $600 per square foot, whereas cities like San Francisco, Los Angeles and Denver come in closer to a $300 per square foot price tag.
Despite the higher costs, NYBC is still confident in the industry as a whole. In their Construction Outlook report for 2018 to 2020 that was published in October, the organization said the city was experiencing its “second and most robust building boom of the 21st century.”
Their report forecasted $61.5 billion in spending in NYC construction for 2018 and expects $59.3 billion to be spent in 2019 and $56.4 billion to be spent in 2020.