NYC Construction Spending Down 23 Percent from 2008; Employment down by16,000 Jobs During Same Period, According to New York Building Congress Construction Outlook

NEW YORK, October 26, 2010 – The effects of the recent national economic downturn are continuing to reverberate through the New York City construction industry in 2010, with construction spending dropping by 23 percent from 2008 and employment down by 16,000 jobs during the same period, according to New York City Construction Outlook 2010-2012, an annual forecast and analysis prepared by the New York Building Congress.

The Building Congress forecasts construction spending in New York City to reach $23.7 billion in 2010, a 12 percent decline from 2009, when spending reached $27.0 billion.  Annual spending, which peaked at $31.1 billion in 2007 and $31.0 billion in 2008, is forecast to increase steadily in the coming years, reaching $25.8 billion in 2011 and $28.6 billion in 2012 – for a three-year total of $78.1 billion.  The 2012 projection, however, is tenuous, given that most of the forecasted increase will not materialize unless the Metropolitan Transportation Authority (MTA) is able to secure new funding for the capital projects it has proposed for 2012.

According to the report, construction employment will average 115,500 in 2010, which is down from 120,400 in 2009 and its peak of 131,400 in 2008.  The Building Congress forecasts 120,700 jobs in 2011 and 128,300 jobs in 2012, though the 2012 projection is reliant upon full funding for the MTA’s capital program.

Government Spending Remains Critical
The New York Building Congress projects that government spending, which includes investments in mass transit, public schools, roads, bridges and other essential infrastructure, will reach $14.7 billion in 2010, down from $15.7 billion in 2009.

Despite that $1 billion decrease, government construction spending currently represents 62 percent of all New York City construction dollars, up from 58 percent a year ago.  This marks the highest proportion of government spending since 1996, when it reached 63 percent, and the fourth consecutive year in which government spending has grown as a percentage of all construction spending.

Based on a review of agency budgets and projected commitments, expenditures in this sector are expected to increase to $15.2 billion in 2011, before jumping to $18.6 billion in 2012, depending on the MTA.

“All eyes are on the MTA.  The cash-strapped agency accounts for approximately 25 percent of the 2012 forecast, yet its five-year capital program is only funded through next year,” warned Building Congress President Richard T. Anderson.  “While the MTA’s projected $3.5 billion in 2011 capital spending seems secure, it is uncertain how much of the $7.6 billion in planned 2012 spending will actually materialize.”

Building Congress Chairman Peter Marchetto added, “The MTA’s financial woes are a cause of great concern for the region.  A fully-funded capital program means greater regional mobility, a more robust economy and middle-class construction jobs.  According to our estimates, more than 18,000 construction jobs would disappear from the 2012 forecast if the MTA is only able to maintain capital spending at 2011 levels, rather than fully funding its current five-year plan.”

WTC Spending Buoys Non-Residential Sector
Non-residential construction, which includes office space, institutional development, sports/entertainment venues and hotels, also has declined in 2010.  Non-residential spending is expected to reach $7.4 billion in 2010, down from $8.8 billion in 2009 – a decline of 16 percent.  Spending in this category, however, is forecast to rise to $8.7 billion in 2011 before falling back to $7.7 billion in 2012.

“The current post-recessionary period continues to take its toll on contractors and skilled workers, especially those who rely on the non-residential building sector,” said Dominick M. Servedio, Chairman of the New York Building Foundation, which co-sponsored the report.  “While demand remains weak overall, we are fortunate that a few major projects, including the World Trade Center, Atlantic Yards and Madison Square Garden, will continue to generate construction activity during the forecast period.”

According to the report, direct construction spending at the WTC site will average $2 billion per year and account for approximately 25 percent of all non-residential construction Citywide between 2010 and 2012.  In addition to the WTC Memorial and PATH hub, work in this category includes ongoing construction of 1WTC and 4WTC, as well as below grade work at 3WTC and 2WTC.

Residential Slump Persists
The residential sector remains in a deep slump.  Total residential spending will reach $1.6 billion in 2010, down from $2.5 billion in 2009.  The Building Congress projects that residential spending will increase to $1.9 billion in 2011 and $2.2 billion in 2012.  By contrast, spending in this sector topped $6.2 billion annually between 2006 and 2008.

At the height of the building boom, between 2005 and 2008, New York City produced, on average, 32,000 units of new housing annually.  In 2009 and 2010, that production has dropped to approximately 6,000 units per year.  The Building Congress forecast estimates production of 6,500 units in 2011 and 7,000 units in 2012.

Building Congress Recommendations
In its report, the Building Congress recommends the following steps:

• A concerted effort must be made among all stakeholders, including the City, State, transit advocates and the building industry, to secure additional funding for the MTA’s capital plan.  Potential vehicles include the long-delayed reauthorization of the federal surface transportation program and adoption of new sources of dedicated revenue, such as congestion pricing or East River bridge tolls.

• The industry must continue to make the case with the Mayoral administration and the City Council to maintain the City’s capital program at current funding levels.  During this period of growing budget deficits, it is critical to devote dedicated sources of funding outside the normal budgeting process, such as has been accomplished with the New York City Water Board.

• Taking the lead of the Port Authority with its Goethals Bridge project, government should employ public-private partnerships to provide upfront financing for upgrades to the region’s infrastructure.

• The Mayor and City Council should take affirmative steps to hasten completion of as many of the more than 650 stalled development projects across the five boroughs as possible in order to unlock their benefits more quickly.

• Government must be an ally and partner, as major education, healthcare and cultural institutions move forward with critical expansion plans.

• New York City needs to maintain the Bloomberg administration’s successes and continue rezoning neighborhoods to permit sensible and sustainable growth in the decades to come.

The New York Building Congress prepared Construction Outlook with the assistance of Regina B. Armstrong 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.

Copies of New York City Construction Outlook 2010-2012 are available to New York Building Congress members by calling 212-481-9230 or e-mailing info@buildingcongress.com.

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.