While some signs suggest the economic downturn has reached bottom, construction activity in the New York region still languishes with little optimism for a quick rebound.

�It�s very much a mixed picture in terms of what to expect,� says Kenneth D. Simonson chief economist of Associated General Contractors of America in Arlington, Va. �Construction is now at or close to its low point and should start showing improvement in most categories by the end of 2011.�

Data from McGraw-Hill Analytics indicates a slight decline in new starts in 2011 as compared to 2010, with nonbuilding, nonresidential and multifamily housing totaling $36 billion, down from $37.69 billion in 2010. Volume in many project types will be down or flat, with multifamily, utilities, environmental public works, hotels, office and bank buildings, healthcare, and stores and restaurants expected to increase slightly. Nonresidential construction in New York will decline from a five-year high of $17.19 billion in 2010 to $13.52 billion in 2011, while nonresidential will increase slightly in New Jersey and Connecticut.

“Private construction seems to be nearing the bottom,” Simonson says. “Vacancy rates have topped out or are starting to come back down for office and market-rate apartment space. By the second half of 2011, there should be some improvement in spending on those categories. Hospital and university construction, which are quite important in New York City and some parts of upstate and New Jersey, are getting better, after having gone into a deep freeze for two years.”

McGraw-Hill data anticipates a regional increase from $3.69 billion to $4.15 billion in office and bank buildings, a jump from $3.18 billion to $4.2 billion in multifamily housing, and a slight bump in healthcare from $1.18 billion to $1.57 billion.

On the public side, McGraw-Hill projects a decline in highway and bridge spending from $6.23 billion to $5.59 billion but a slight increase in environmental public works, $3.35 billion up from $3.22 billion, and in other public works, $2.56 billion up from $2.43 billion 

“Publicly funded construction is in for a rough time,” Simonson says. “The message from Gov. Christie is pretty clear that he will be very tough on public funding of anything, including construction. The budget mess in New York State makes it unlikely they will be able to add construction money to their spending. That side of construction looks quite weak.”

Gov. Chris Christie canceled the Access to the Region’s Core tunnel project, after work had begun.

The New York legislature and Gov. Andrew Cuomo will be wrestling with a $9 billion to $10 billion budget deficit reports Steve Stallmer, vice president of Government & Public Affairs for Associated General Contractors of New York State in Albany.

“That will require cutting spending to fill the gap, because the incoming governor, Andrew Cuomo, has committed to not raising taxes,” says Stallmer, adding that the organization hopes highway funding can stay at the current level. Universities, schools and hospitals capital programs will be adversely affected.

“On the private side, it’s getting better. Banks are lending more, and we have pockets of private development,” Stallmer says. He offered as an example the $4.2 billion, 1.2 million-sq-ft, four-story chip-fabrication facility for GlobalFoundries in Malta, north of Albany. “I think we have the hit bottom of the valley and we’ve started to head our way back up.”

New York McGraw-Hill Analytics forecasts $8.53 billion in nonbuilding construction in New York in 2011, up from $7.9 billion in 2010; 13.52 billion in nonresidential building, down from $17.19 billion in 2010; and $5.76 billion in residential construction, up from $4.62 billion in 2010. That totals an expected $27.82 billion in 2011, compared with $29.72 billion in 2010.

On the other hand, the New York Building Congress’ New York City Construction Outlook 2010-2012, reports an expected up tick in construction spending to $25.8 billion in 2011, compared to $23.7 billion in 2010. That includes a slight boost in private spending, from $1.6 billion in 2010 to $1.9 billion in 2011. The forecast also depends on an increase in government spending, from $14.7 billion in 2010 to $15.2 billion in 2011.

Ronald S. Berger, executive director of the Subcontractors Trade Association in New York, says he thinks the Building Congress’ report sounds reasonable, but he remains unsure about where the government money will come from to support public capital programs.

Building Congress President Richard T. Anderson called the outlook guarded, especially for 2012, when it predicts spending will increase to $28.6 million, including $7.6 billion in spending by the Metropolitan Transportation Authority, money that is not allocated, yet will be need to fund such projects as East Side Access and the Second Avenue Subway. Anderson expects some state money will come through, although perhaps not the full amount requested.

The Building Congress report suggests new sources of revenue, such as congestion pricing or East River bridge tolls. Public-private partnerships could help get transportation projects moving, as they have in other states. The state published a summary of a symposium held on the topic a few years ago but has not formed such partnerships.

“I hope with a new governor (Andrew Cuomo) we can revitalize those discussions and begin to finance the infrastructure projects we so desperately need to create an economic development platform,” says Louis J. Coletti, president and CEO of the Building Trades Employer’s Association in New York.

New Jersey McGraw-Hill Analytics anticipates $3.04 billion in nonbuilding construction in New Jersey in 2011, down from $3.87 billion in 2010; $3.63 billion in nonresidential building, up from $2.73 billion in 2010; and $2.55 billion in residential construction, up from $1.99 billion in 2010.

“It doesn’t look bright, and we might be progressing a little slower than other states around us,” says Jack Kocsis, chief executive officer of Associated General Contractors of New Jersey and Building Contractors Association of New Jersey, in Edison. “There is reluctance in the development community to put their money at risk. There are factors about our approval process. We don’t have a time frame we can give the development community for getting projects approved. The governor is trying to unravel it, but it will take time.”

In addition, Kocsis says the state is broke, which will affect public projects.

The New Jersey Alliance for Action’s 26th annual Construction Forecast estimates public and private construction will be down $11 billion or 30% to $25.2 billion in 2011 and 2012. Much of the decline is related to transportation projects and the expectation that the New Jersey Transportation Trust will run out of money in 2011.

The Alliance projects utilities will spend $5.7 billion in the next two years and pharmaceutical and medical technologies companies will invest $2.6 billion

Kocsis calls the Alliance’s forecast “probably accurate.”

“Thirty percent is a reality check,” Kocsis says. “We’ve been going through three years of a down cycle and I don’t see any drastic improvement. We are probably at the bottom and will climb slightly. It took several years to get into this, and it will take several to get out.”

Connecticut McGraw-Hill Analytics projects $1.21 billion in nonbuilding construction in Connecticut in 2011, up from $1.05 billion in 2010; $1.93 billion in nonresidential building, up from $1.75 billion in 2010; and $1.44 billion in residential construction, up from $1.12 billion in 2010.

However, Donald J. Shubert, president of the Connecticut Construction Industries Alliance in Wethersfield, reports virtually no vertical construction, with state university, schools and other projects drying up. Some private university work has started.

“They realize they are getting a lot of construction for the dollar and are taking advantage of the lower prices,” Shubert says. “The big thing is the competition. The pool competing for jobs is so big.”

Work is continuing on the Metropolitan District’s $2.1 Billion Clean Water Project in Hartford, including sewer separation, inflow and infiltration reduction, a 13,000-ft storage and conveyance tunnel, 200 million gallon per day treatment plant expansion for wet weather control, nitrogen treatment facilities, ultraviolet light disinfection, and a heat recovery facility to produce electricity from incinerator waste heat. The district is starting its fifth year of the 15-year project.

“It was slow starting over the last couple of years, but we are see activity there,” says Shubert. In addition the American Recovery and Reinvestment Act funded some clean water projects in the state that are now getting under way.

Shubert says there has been some renovation of small retail spaces. However, retail, schools and other commercial building often follow rooftops, and Bureau of Economic Analysis data manipulated by the Connecticut Center for Economic Analysis shows new home construction in Connecticut continues to shrink, with home prices not near to overcoming the value they lost in 2009, says Peter Gunther, a senior research fellow at the center. He adds that the center is a little more optimistic than it has been about jobs, but they are “not rebounding in a big way.” 

Shubert adds that he expects the new Gov. Dan Malloy will address the state’s infrastructure needs, despite a $3 billion state budget deficit. Four major projects, including the Q-Bridge in New Haven have consumed most of the available dollars.

“He knows that investing in infrastructure will be part of the solution to getting Connecticut’s economy going again,” says Shubert, adding that there is no indication the state is climbing out of the doldrums. “We always planned for 2011 will be the worst year [for construction], and it looks like that is going to happen.”