The New York Building Congress recently released its annual construction forecast, predicting an increase in construction activity for 2011. But Building Congress President Dick Anderson tempered the optimism by saying it�s an outlook that depends heavily on public spending at a time when those dollars may be harder to obtain.
“It’s the most guarded outlook we have put out since we started the series a decade ago,” he said.
The Building Congress’ New York City Construction Outlook 2010-2012 annual forecast and analysis reports in 2010 a 23% drop occurred in construction spending from 2008, $23.7 billion down from $31 billion, with 16,000 fewer jobs in the industry, 115,500 in 2010 compared with 131,400 in 2008. Looking ahead, the report projects a steady increase in the coming years, with construction spending reaching $25.8 billion in 2011 and $28.6 billion in 2012, at which time job growth should reach 128,300.
However, the forecast is predicated upon the Metropolitan Transportation Authority securing new funding for its $7.6 billion in projects for 2012, about 25% of the Building Congress 2012 forecast. The cash-strapped agency is funded only through 2011.
“The report is a little optimistic in terms of assuming there is going to be additional financing for the MTA plan,” says Louis J. Coletti, president and CEO of the Building Trades Employer’s Association in New York. “Given the fiscal condition of the state, even though it’s in desperate need of infrastructure investment, in this political climate, it will be difficult to identify public funding sources.”
Anderson says he has no doubt the state legislature will fund, at some level, the MTA capital program, perhaps between $3.5 billion, the 2011 budget, and $7 billion, near the 2012 plan.
“The question is not whether the MTA capital program is funded for years three, four and five; the question is how much and in what way it is financed” Anderson says. “They have enough money from the regional payroll tax to continue the program at a certain level, and secondly, they are not going to discontinue the program and forego a considerable amount of federal money. I don’t think New York is as foolish as [New Jersey] Gov. Christie.”
Christie recently canceled the $8.7 billion Trans-Hudson Rail project, said to be the largest public works project in the country.
Ronald S. Berger, executive director of the Subcontractors Trade Association in New York, says the report leaves a lot of room to go either way.
“I don’t know where the government is going to come up with the money to support their capital programs. If they do, great, and if they don’t we have a lot of problems.”
All together, the Building Congress forecast hinges on an increase in government spending, from $14.7 billion in 2010 to $15.2 billion in 2011 and $18.6 billion in 2012.
“The big issue for the public sector and heavy civil construction is the lack of funding for the MTA capital program and the lack of a federal transportation bill,” says Denise Richardson, managing director of the General Contractors Association of New York. “Those two taken together will decide how much of this work actually happens. Until government, at all levels, decides funding for infrastructure is important, any of these statistics are hopeful speculation.”
On the private side, the Building Congress reports a decline in activity in 2010, with nonresidential spending estimated at $7.4 billion, down 16% from $8.8 billion in 2009. However, the organization anticipated an increase to $8.7 billion in 2011, then a decline to $7.7 billion in 2012. Work at the World Trade Center site accounts for about 25% of the nonresidential construction.
“There has been a significant decline and will continue to be a decline on the private side,” Coletti says. “The building trades and unions are at a 30% to 40% unemployment rate. The banks are still reluctant to finance new developments, and the market in general is not creating demand for new office space.”
The forecast pegs residential at $1.6 billion in 2010, down from $2.5 billion in 2009, but it projects a slight up tick to $1.9 billion in 2011 and $2.2 billion in 2012. That compares to $6.2 billion annually between 2006 and 2008.“If things straighten out by the middle of 2013, I’ll be happy,” Berger says. “I don’t think anything is going to happen in 2011, and 2012 will be slow. But by 2013 we will be getting back to where we were. It’s a horrible situation.”