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Charts and Diagrams

Charts and Diagrams

Construction Spending 1995-2009

Construction spending reached a record $24.6 billion in 2006 and is expected to reach $26.2 billion by the end of 2007, $27.5 billion in 2008 and $29.0 billion in 2009, for a three year total of $83 billion.

Office Building Construction 2000-2009

In 2006, major office buildings under construction accounted for about 67% of the City’s

total office development; 9 major office buildings were constructed in 2006, 6 buildings are

forecast for 2007, 9 more in 2008, and 10 are anticipated to be under construction in 2009.

Residential Construction 1995-2009

The strong residential construction market, representing annual spending of more than $5 billion, is expected to continue through 2009. Residential spending is expected to produce more than 35,000 dwelling units in 2007.

Non-Residential Construction 1995-2009

Citywide non-residential construction, which is forecast to reach $9.5 billion in 2008 and $11.2 billion in 2009, includes sports and entertainment complexes, educational facilities, hospitals and other public use and commercial buildings.

Public Construction Spending 2001-2009

Public construction in the City reached $11.9 billion by year end 2006 and is expected to exceed $12 billion annually through 2009, if all planned spending occurs. The capital budget of the City of New York accounts for most of the strong outlook.

Construction Employment 1995-2009

Construction employment in New York City, which reached 116,600 jobs in 2006, is expected to reach 122,600 by the end of fiscal 2007, more than 126,700 in 2008, and top 130,000 by 2009.


Construction Remains White Hot: $83 Billion in Spending Projected Over Three Year Period

Construction Remains White Hot: $83 Billion in Spending Projected Over Three Year Period

Construction spending in New York City by government,
businesses and institutions will reach $83 billion in the years 2007 through 2009, continuing a remarkable trend of accelerating growth in construction activity.

This marks the seventh and strongest forecast produced by the New York Building Congress. While overall construction spending reached a record $24.6 billion in 2006, the Building Congress forecasts spending of $26.2 billion in 2007, $27.5 billion in 2008, and $29.0 billion in 2009. If realized, this would represent an 18 percent increase in annual spending over a three-year period.

The ongoing building activity is the result of an industry in which every sector seems to be booming. Spending is up across the board, including office construction, infrastructure improvements, new schools, expanded universities and cultural institutions.

By far, the non-residential sector, which includes office construction, has experienced the biggest percentage increases in recent years, a trend that is expected to continue through 2009. After modest growth in 2004 and 2005, annual construction in this sector is surging – with spending more than doubling between 2005 (actual spending of $4.1 billion) and 2007 (projected at $8.3 billion). Even at these numbers, this sector has not yet peaked. Citywide non-residential construction is forecast to reach $9.5 billion in 2008 and $11.2 billion in 2009.

An analysis of the data finds that New York City is defying the nationwide slump in housing construction. Residential spending in New York City, which reached $4.9 billion in 2006, is projected to climb to $5.6 billion in 2007, before leveling off at approximately $5.2 billion in 2009. Remarkably, residential spending in 2007 is expected to produce more than 35,000 dwelling units. By comparison, approximately 9,000 new units were produced in 1997, and just five years ago, in 2002, that number stood at 18,500.

Based on a review of the latest multiyear capital plans and recent spending, government construction is projected to reach $12.3 billion in 2007, an increase from $11.9 billion in 2006. The Building Congress projects capital spending, including investments in mass transit, public schools, roads, bridges and other essential infrastructure, to reach $12.6 billion in 2008 and 2009.

Construction employment, which reached 116,600 jobs in 2006, is projected to increase to 122,600 in 2007, 126,700 in 2008, and top 130,000 in 2009. This total represents about 4.5 jobs per million dollars spent, which is down from 10 jobs per million in 1998. This is due, primarily, to increased costs as well as rising government construction as a percentage of all construction. As a general rule, a higher proportion of infrastructure spending is devoted to materials, while private sector construction, such as housing and office construction, is more labor intensive.

Inside The Numbers:

Housing and Office Construction Rise in Tandem

Historically, the relationship between residential and non-residential construction has been that one sector surges ahead while the other takes a back seat. Today, New York City is experiencing a prolonged period in which the economy is firing on all cylinders and feeding construction activity in all sectors. New and modern office space is being readied for businesses of all sizes while housing stock is increasing to accommodate more workers.

New York’s continued housing boom, despite the nationwide downward trend, is borne of multiple factors. First and foremost is continued demand. New York City must produce a minimum of 20,000 new housing units each year merely to keep pace with demand and replace outdated units. While 2007 is likely to be the fifth consecutive year of more than 20,000 units produced and the third straight year of building more than 30,000 units, New York City is still playing catch-up from the 1990s, a decade in which new housing production routinely fell below or around 10,000 units.

The City’s housing sector also has been strengthened by the Bloomberg administration’s successful efforts to rezone key neighborhoods along the waterfront and in former manufacturing districts to allow for high-density housing. This strategy has provided the needed sites on which to build. Other crucial factors include a strong economy, heightened global demand fueled by a weak dollar, and the City’s successful efforts to keep crime down and improve quality of life, which has attracted new residents and reversed the trend of suburban flight.

The office sector, perhaps the biggest success story in this year’s report, has gained considerable steam of late, bolstered in part by a strong economy and pent-up demand brought on by a lack of building shortly after September 11, 2001. The outlook is particularly strong due to the ongoing rebuilding in Lower Manhattan. In addition to the Freedom Tower and the Goldman Sachs headquarters, three additional World Trade Center towers, each about as large as the Empire State building, are slated to begin construction in 2008 and continue through 2012. Activity is also expected to pick up soon on Manhattan’s West Side, including the area around Penn Station and the Metropolitan Transportation Authority (MTA) rail yards.

Other areas of strength in the non-residential sector include higher education, hospitals and healthcare and professional sports, as evidenced by the construction of new stadia for both the Yankees and Mets, and significant expansions of Columbia University, NYU Medical Center and others.

Achieving The Outlook:

The National Economy

Given all current positive indicators, it is hard to envision a significant deterioration in construction activity during the forecast period. Most of the major public construction projects are adequately funded through 2009, and the majority of major office construction projects, such as Goldman Sachs and at the World Trade Center, are not dependent upon swings in the economy.

Still, there is no mistaking the warning signs on the economic horizon and the potential negative impact of a worsening national economy and tighter credit markets. While New

York City has worked hard to diversify its economy, the financial and real estate sectors still play an outsized role. A prolonged slump on Wall Street would likely create downward pressure on jobs and the tax revenues that fund the region’s capital programs.

Building for growth requires steady, multi-year investment in the City’s infrastructure, and it is important that the public sector continue to fund critical infrastructure projects even during periods of budgetary difficulties.

The best course is the identification and implementation of dedicated financing streams for capital spending. One particularly promising example is the Bloomberg administration’s congestion pricing proposal.

Problems of Success

With so much work underway and about to start, it will be important to keep an eye on the effects of such intense demand for construction materials and labor.

There is no doubt that construction costs are on the rise, currently at a rate of about 1% per month. The price of such essential building supplies as concrete and steel has risen significantly, driving up the budgets of all major public and private sector projects. Inflationary pressure is also evident in the cost of contractors, subcontractors and skilled labor, the cost of land, fuel prices and compliance with environmental regulations. While the appetite for construction has not yet been abated by rising costs, the question remains at what point developers and government might find building to be cost-prohibitive and begin to scale back.

Coordination is another key area of concern. With major development and infrastructure projects underway in all five boroughs, it will take a committed partnership between the public and private sectors to coordinate key activities, such as the delivery of supplies and issuance of permits, as a means of keeping construction activity flowing and minimizing disruptions to local businesses and residents.

Despite these concerns, the unprecedented level of construction activity in all sectors of New York City’s economy is expected to continue. The extent to which the forecast is fulfilled, however, depends on ongoing financing and economic uncertainties.


Jan 1998