Study: NYC Construction Spending to Rise 9% This Year
New York City construction spending is expected to rise 9% this year, to $30.7 billion, surpassing the $30-billion mark for the first time since 2008, a new New York Building Congress study shows. The increase is due largely to higher demand for luxury housing, ongoing work at the World Trade Center and continued public infrastructure investment, according to the New York City Construction Outlook 2012-2014 study.
Overall construction spending increased about 22% since hitting a post-recession low of $25.2 billion in 2010. Construction activity will remain steady with 2013 projected spending of $30.2 billion and 2014 spending of $29.1 billion, says the study.
NYBC and consulting firm Urbanomics, New York, conducted the study, which incorporates reviews of private construction data as well as federal, state and city capital budgets and plans.
“The city’s construction industry has experienced a swift and rather remarkable resurgence,” says Richard Anderson, NYBC president. “From the recently topped 1 World Trade Center to the Second Avenue Subway below, New York’s private and public sector is investing heavily in its future.”
Non-residential construction spending is expected to reach an all-time high of $12.6 billion in 2012, up from $10.5 billion in 2011. However, the study predicts that spending in this sector will fall to $11.1 billion in 2013 and to $8.8 billion in 2014. It attributes the decline to the completion or winding down of some major projects including 1 and 4 WTC, 250 West 55th Street, Barclays Center, and the renovation of Madison Square Garden.
However, Anderson is optimistic about the long-term future for the non-residential sector once the economy recovers. He says that about 20 million sq ft of new office towers are now “shovel-ready.” The city is also “on the verge of a decades-long building boom in higher education, led by Columbia, New York University and Cornell,” he adds.
Spending in the residential sector is expected to bump up 2% to $3.2 billion this year, and climb to $4.2 billion in 2013 and $5.3 billion in 2014. But, despite the upswing, spending in this sector remains well below its 2006 and 2007 peak when it surpassed $6 billion, NYBC says.
“Looking ahead, we are concerned about the prospect of declining government investment beyond the forecast period,” Anderson says. “The city’s Office of Management and Budget is currently projecting that construction and design commitments will be cut in half between the current fiscal year and fiscal 2015. And there are similar questions regarding the next Metropolitan Transportation Authority capital plan, which starts in 2015.” He says that much of the funding under MTA’s current five-year plan was achieved through increased borrowing, and “it is unlikely that current levels of investment can be achieved without new sources of dedicated revenue.”
Government construction spending is expected to remain flat with last year, reaching only $14.9 billion, up from $14.6 billion in 2011. NYBC expects only a slight increase next year to $14.9 billion and a rise to $15 billion in 2014. These figures are based on a review of agency budgets and commitments including the MTA, which is expected to invest about $3.7 billion in the city’s transit system between 2012 and 2014, NYBC says.
Meanwhile, construction employment remains on the decline. The study forecast 110,800 jobs in 2012, the lowest level of overall industry employment since 1998 and down from 111,500 jobs in 2011.