New york building congress analysis foresees renewed building boom by 2014

Construction Activity and Employment Forecast to Return to 2007 Peak

Fueled by rapid increases in residential and office development, overall New York City construction spending is expected to increase by 6.2 percent this year and by 24 percent from 2012 to 2014, according to a New York Building Congress midyear update of its annual analysis of current and projected construction activity. 

After reaching $30.1 billion in total construction spending in 2012, the Building Congress forecasts spending of $32 billion in 2013, and $37.3 billion in 2014.  The updated outlook is a significant improvement from the organization’s October 2012 projections, which called for annual spending of $30.2 billion in 2013 and $29.1 billion in 2014.

“The upward revisions in our forecast, from data compiled over the past few months, particularly for the private sector, are extremely encouraging,” said New York Building Congress President Richard T. Anderson.  “While the effects of inflation and the rebuilding associated with Superstorm Sandy partly explain the projected increase in overall spending, there is no doubt that much of the gain is fueled by increased private-sector development activity and an improving economy.” 

When adjusted for inflation, the value of construction in 2013 is forecast to be about 13 percent below the peak of 2007.  But by 2014, the Building Congress expects that spending, expressed in constant dollars, will be just 2 percent below the 2007 peak achieved at the height of New York’s most recent building boom. 

The Building Congress projects similar increases in construction employment in the coming years.  After producing 114,900 construction jobs in 2012, the Building Congress projects construction employment to reach 119,800 jobs in 2013, followed by 130,600 in 2014.  If realized, it will mark the first time that construction employment has topped 130,000 since reaching a peak of 132,600 jobs in 2008. 

"The recession and its aftermath have been difficult for members of our affiliated unions," said Gary LaBarbera, president of the 100,000 member Building and Construction Trades Council of Greater New York. "Aggressive measures taken by organized labor, including project labor agreements, were instrumental in allowing billions of dollars of work that was in question to advance and mitigate what could have been a far worse situation. Working with government to maintain strong levels of public infrastructure investment and with developers and contractors as the private market recovers has put us in position to see significant employment gains in the last year and a strong outlook for the coming years."

Red-Hot Commercial Sector
Non-residential construction, which includes office space, institutional development, sports/entertainment venues and hotels, is projected to increase by 38 percent in the current year (from $9.8 billion in 2012 to $13.5 billion in 2013).  The Building Congress projects a further leap – to $15.5 billion – in non-residential spending in 2014.

The rapid rise in spending is due primarily to a burgeoning office construction boom. The Building Congress projects the addition of nearly 2.5 million square feet of Manhattan office space this year, and another 3.9 million square feet in 2014.  This sector is being buoyed by work at two Hudson Yards towers, the Manhattan West project and anticipated construction at 3 World Trade Center in 2014, in particular.

“The near-term outlook in the non-residential sector is really quite extraordinary,” said Real Estate Board of New York President Steve Spinola.  “While it has taken longer than initially anticipated, the public-private partnerships that were formed to rebuild the World Trade Center and open up Manhattan’s Far West Side are starting to pay big dividends.”

Residential Rebound Accelerates
The residential sector, which suffered the steepest drops in spending after the recession, continues its remarkable rebound.  Residential construction spending is forecast to increase by 17 percent in 2013 (from $5.1 billion in 2012 to $6.0 billion in 2013).  Better yet, residential spending is projected to increase by 56 percent from 2012 to 2014, when the Building Congress projects $8 billion in housing construction.  All of this is a drastic improvement from the mere $2.3 billion in residential spending back in 2010.

According to the analysis, the number of housing units produced will rise from 11,000 in 2012, to 13,800 in 2013, and 16,900 in 2014.

Government Spending Lags
Government spending, which includes investments in mass transit, public schools, roads, bridges, and other essential infrastructure, is forecast to reach $12.4 billion in 2013, an 18 percent decline from the $15.1 billion in government spending in 2012.  Based on a review of agency budgets and projected commitments, the Building Congress estimates expenditures in this sector to reach $13.8 billion in 2014. 

Of the three main sources of government infrastructure investment in the five boroughs, annual spending at both the Metropolitan Transportation Authority and the Port Authority of New York & New Jersey is forecast to remain constant, at about 3.7 billion and $1.8 billion respectively.  As such, virtually the entire decline in government spending over the next three years is a result of decreases in the City of New York’s spending on infrastructure design and construction.

Over a period of six consecutive years, starting in 2007, the government sector accounted for at least 50 percent of all New York City construction spending.  If the Building Congress midyear forecast holds, however, government construction as a percentage of overall spending will decline to 39 percent in 2013, and 37 percent in 2014.

 “While construction spending by City government appears to be heading down, the private sector is more than making up for it with new housing, office and hotel development in particular,” Mr. Anderson added.  “The outlook also is being bolstered by anticipated institutional work, led by hospitals and universities.”

Mr. Anderson cautioned, however, that achieving the forecast is dependent upon a continued expansion of the overall economy and the ability of government to secure financing for its ongoing and future capital budgets.

Charts and Diagrams

Source: McGraw-Hill Construction Dodge*, public capital budgets/plans, Urbanomics.

Source: McGraw-Hill Construction Dodge*, public capital budgets/plans, Urbanomics, based on ENR Building Cost Index (BCI) and Construction Cost Index (CCI)

* Dodge data used for this analysis can be
purchased at dodge.construction.com