After a banner year in 2003 during which $16.7 billion was spent on construction in New York City, spending remained near that record in 2004 reaching $16.6 billion. Though non-residential spending in the City dropped 20% in 2004, that was offset by a 23% increase in residential construction and a 4% growth in capital spending by public agencies. The continued housing demand in 2004 contributed to the construction of 25,200 units – a 19% increase from 2003 and the first time that number has exceeded 25,000 since the early 1970’s. Meanwhile, non-residential construction faltered, dropping by about $1 billion. Contributing to this decline was a 23% drop in office construction, from 16.5 to 12.8 million square feet (msf). Record spending is expected in 2005 when office construction rebounds in response to rising employment. Overall, non-residential spending will likely increase by over $2.6 billion as the floorspace slated for construction exceeds 20 msf, just short of the 2001 peak. Non-residential construction is anticipated to remain strong before dropping in 2007. Construction of major office buildings, representing about 60% of the total office market floorspace, is expected to peak at 11 in 2005 and decrease to 5 in 2007. Furthermore, after steadily declining from 2001 through 2004, school construction by the City and State could rise dramatically from 2005-2007, depending on the State’s ultimate response to the Campaign for Fiscal Equity litigation. If expected funding levels are realized, school construction would peak at more than $2.9 billion in 2005 and remain over $2.8 billion in 2006 and 2007. Residential construction should remainsteady at about 23,000 units for the forecast period, assuming favorable interest rates continue. Over half of the City’s construction spending is used for the maintenance and development of public infrastructure. From $9.4 billion in 2004, total spending should approach $11 billion by 2007. Assuming this level of funding, overall spending would exceed the 2004 level by as much as $3.3 billion in 2005 and remain high through the end of the forecast period. Obstacles Could Undermine Full Public Construction Spending Record levels of proposed public infrastructure spending depend on the availability of funds to New York City agencies and State authorities. The New York City Capital Budget, as well as the Five Year Capital Plan of the Metropolitan Transportation Authority (MTA), raises doubts about the extent of funding and the actual public construction spending likely to take place.The $15.2 billion, five-year maintenance bill for the City’s subways, buses and commuter rail services is expected to be paid out of existing revenue sources over the next three years, with the remaining two years to be funded through unspecified increases in various taxes and fees. Additionally, the State Budget covers only $2 billion of the $3.7 billion pricetag for constructing the first phase of the Second Avenue Subway and the Long Island Rail Road extension to Grand Central Terminal.
