Reviving the Dead Zones
Contractors, developers and designers face a new sort of project backlog across the New York region today: many hundreds of stalled sites that loom as a steep challenge to the industry. But while dormant sites stand as grim reminders of a weak economy, it is the jobs that are set to restart that are posing new problems.
“I don't think we've ever seen the phenomenon at this scale,” says Richard Anderson, president of the New York Building Congress, of the high number of stalled sites.
The 2008 market crash left a wave of project shutdowns in its wake, prompting the New York City Department of Buildings to create a Stalled Sites Unit in 2009 to track them. “Since then, the unit has performed more than 12,000 inspections at sites throughout the city,” says Tony Sclafani, the agency's associate commissioner of communications and public affairs. “Regardless of whether a site is active or inactive, property owners must maintain their sites in a safe manner, including proper overhead protection and proper fencing.”
The DOB's stalled sites list updates frequently, with work having resumed at 569 jobs since the count began, including 154 that have finished. Sclafani says the list peaked in November 2010 and by late September was down by 10% to 644 sites across the five boroughs.
One notable restart is the $1 billion, 39-story 250 W. 55th St. commercial tower in midtown Manhattan that Boston Properties took off line in 2009. The firm relaunched the project this summer with a new anchor tenant.
While Boston Properties conducted an orderly site shutdown and restart, many project teams do not, says Frank Giunta, senior vice president for construction claims and consulting at Hill International, a Marlton, N.J., program and construction manager firm.
Running the Gamut
“People think they can restart right from where the project left off,” Giunta says. “We've seen the gamut, from projects that went into full stabilization mode when work stopped, to sites where the crew left a routine shift at 3 o'clock on a Friday and the site stayed that way for months and months.”
Such sites, as well as how they might look in five years, are worrisome, says Anderson. Even more troubling is that less than 30 developers have applied for a new city program extending construction permits on stalled projects meeting certain safety, maintenance and security conditions by up to four years. The aim of the program is to ease restart chores. “The fact that they're not applying means they're not going to take advantage of it soon,” Anderson says.
Meanwhile, there are no shortages of shutdown tales, some arising from developers defaulting on loans, and others from conscious decisions to hit the pause button, says David Pfeffer, partner at Tarter, Krinsky & Drogin, a New York law firm that represents owners.
Work stopped on the 1-million-sq-ft tower on 55th Street due to a weak leasing market, but Boston Properties still opted to complete foundations, install site protection measures and even finish steel fabrication and some curtainwall work during the downtime. That allowed a quicker turnaround when Morrison & Foerster, a law firm, signed as anchor tenant earlier this year, with work resuming on the LEED-Gold building in late summer. Turner Construction is slated to complete the project in 2014.
“That's an important distinction,” says Robert Selsam, senior vice president and regional manager for Boston Properties. “We were able to make logical decisions about how much more money to put in before we stopped.”
Another big project that is restarting is the Revel Hotel and Casino resort in Atlantic City, N.J., a $2.4- billion, 53-story, 6.3-million-sq-ft complex that stalled during the downturn but is back on track to finish next spring. The Mohegan Sun casino in Uncasville, Conn., similarly hit the brakes in 2008 on Project Horizon, a $925-million expansion of its hotel, spa, retail and garage facilities. The Mohegan Tribal Gaming Authority has since replaced that project with plans for a new hotel and other upgrades.
The market, at least, has a large inventory of potential restarts, Hill's Giunta says. “We think there will be more,” he adds.
Some projects expected to restart are huge, including the 3-million-sq-ft retail complex formerly known as Xanadu in East Rutherford, N.J., says George McNeil, vice president and regional manager of operations in New York for Gilbane Building. That complex, renamed American Dream at Meadowlands, was originally budgeted for $1.3 billion. It has sat unfinished since 2008.