Spurred by a rise in residential construction, annual nyc construction spending tops $30 billion for first time since 2008

Construction Activity Yielded Nearly $47 Billion in Total Economic Impact for City

Overall construction spending in New York City reached $30.6 billion in 2012, a 3.6 percent increase from 2011, when total spending reached $29.5 billion, according to a New York Building Congress analysis.  This marks the first time since 2008 that annual construction spending has topped the $30 billion mark.  Last year was also the highest (non-inflation-adjusted) level of spending since the peak of 2007 when construction spending reached $31.1 billion.

Residential
Residential construction spending increased 56 percent in 2012 – from $3.3 billion in 2011 to $5.1 billion last year.  While still well below a 2007 peak of $6.4 billion, the sector has nonetheless rebounded sharply from a recent low of $2.3 billion in 2010.

A total of 10,599 new residential units were constructed in 2012, a 19 percent increase from 2011.  The fact that spending increased by 56 percent – while new units increased by just 19 percent – indicates that much of the additional spending in 2012 was devoted to luxury residential construction as well as interior renovations and alterations.

“Annual spending on residential construction has more than doubled since 2010, which is terrific news for the industry,” said New York Building Congress President Richard T. Anderson.  “But we can’t reach full recovery through luxury construction alone.  New York City should produce an average of 20,000 new residential units annually, and that can only be achieved through construction of housing at multiple price points throughout the five boroughs.” 

Government
Government construction spending, which includes investments in mass transit, public schools, roads, bridges and other essential infrastructure, increased slightly from $15.5 billion in 2011 to $15.6 billion in 2012.  In all, government construction accounted for 51 percent of New York City construction spending.   Government spending peaked at $16.3 billion in 2008, but has remained remarkably stable in the post-recession years. 

Non-Residential
Non-residential construction, which includes office space, institutional development, sports/entertainment venues and hotels, declined by 8.5 percent– from $10.7 billion in 2011 to $9.8 billion in 2012.  Despite the year-over-year decline, 2012 still represented the second best year, in terms of non-inflation-adjusted spending, ever experienced in the non-residential sector. 

Employment
Construction employment in New York City reached 114,900 in 2012, a 2.4 percent increase from 2011, when construction accounted for 112,200 jobs.  Industry employment, however, remains well short of the 132,625 jobs that were produced in 2008.  The fact that employment has not kept pace with spending is due to a number of factors, including a higher prevalence of less labor intensive construction, improvements in technology and increases in overall costs.

Economic Impact
While construction activity directly resulted in 114,900 construction jobs and $30.6 billion in spending, its overall impact on the New York City economy was far greater.

Each dollar directly spent on construction yielded more than $1.50 in economic activity in all New York City industries.  Consequently, the $30.6 billion in direct construction spending in New York City yielded another $16.3 billion in other business revenue – for a total economic output of $46.8 billion. 

Similarly, last year’s construction activity produced 98,500 jobs in addition to the 114,900 direct construction jobs.  About 36,100 jobs were created in fields that service the construction industry, such as lawyers, accountants and suppliers.  Another 62,400 jobs were induced as a result of the increased household earnings that resulted from direct construction and the related expansion of economic activity. The average salary for all these workers was $115,000.

“Overall, the data tell a very positive story about the resiliency of the construction industry and its continued ability to serve as an engine for comprehensive economic growth in New York City,” added Mr. Anderson.

Charts and Diagrams

Source: FW Dodge, Public Capital Budgets/Plans, & Urbanomics

Source: Urbanomics and MIG, Inc., Implan Pro Model, calibrated for New York City in 2011