October 12, 2011
By Neal Tepel
Construction costs in New York City, which increased in 2010 after a 2009 decline, have increased at an accelerating rate thus far in 2011, according to a New York Building Congress review of multiple cost induces.
According to Engineering News-Record’s (ENR) Building Cost Index (BCI), construction costs in New York City have risen 3.55 percent in 2011.
This is in addition to a 2.42 percent increase in 2010, which came after a 1.94 percent decline in 2009. ENR uses local prices for Portland cement and lumber, the national price for structural steel, as well as local union wages, plus fringes, for carpenters, bricklayers and iron workers, to derive BCI.A separate survey of the New York metropolitan region by Rider Levett Bucknall (RLB) finds that construction costs in the area have increased by 2.13 percent in 2011.
According to the RLB survey – which examines much the same data as ENR but also includes estimates of bid price changes, including overhead and profit – construction costs increased 0.54 percent for all of 2010 after falling by 3.39 percent in 2009.
The rate of increase in local construction costs for 2011 is roughly equivalent to the national average, which indicates that much of the cost increase here is attributable to rising material costs.
“After years of relentless cost escalation, New York City experienced a bit of a respite in 2009 and even in 2010 as a result of the economic downturn,” said Building Congress President Richard T. Anderson. “Unfortunately, the 2011 cost increases are starting to mirror the rate of cost escalation experienced during the middle of the previous decade when construction was soaring.” Mr. Anderson added, “Moving forward, it will be useful to examine the effect, if any, that the recently-concluded construction labor negotiations have on overall construction costs. It will likely take months (if not years) for the agreements, which were reached over the course of the summer, to filter into the data.”
New York City vs. Select American and International Cities
While New York City remains one of the most expensive construction markets in the United States, it fares well in overall construction costs when compared to London, its chief international rival. Class A office space construction is currently $290 per square foot (psf) in New York, compared to $505 psf for comparable buildings in London. New York City’s costs also are lower, overall, than Tokyo and Sydney, though higher than most major Asian cities, including Beijing, Seoul and Hong Kong, as well as Dubai.
While current data are not available for all the major U.S. cities, the data reviewed by the Building Congress show that office tower construction in New York City remains more expensive than Los Angeles ($280 psf), Boston ($280 psf) and Washington, D.C. ($240 psf). It remains less expensive, however, than San Francisco ($300 psf) and Honolulu ($378 psf), which is likely due more to issues of geography than anything else.