October 18, 2013
By Marc Bussanich
New York, NY—Construction activity is booming in New York and construction spending is projected to grow to as much as $37 billion by 2015, according to the New York Building Congress. Residential construction is leading the charge but the Congress is concerned about a reduction in government spending on infrastructure, especially the MTA’s capital budget which doesn’t have dedicated city or state funds beyond October 2014. Watch Video
Richard T. Anderson, president of the New York Building Congress, presented the Congress’ 13th annual construction outlook forecast at a breakfast forum on Thursday morning at the New York Hilton.
He noted the report’s genesis stemmed from construction professionals seeking information on where the construction market is heading; the forecast is based on building permits and capital programs and other data.
According to Anderson, overall spending and employment are poised for a return “to the boom times of the mid-2000s” with spending to reach $31.5 billion this year, which is a 14 percent increase from 2012’s $27.6 billion.
The Congress analyzes and compiles data about the industry based on three sectors—residential, non-residential (office, institutional and retail) and government.
He noted that residential construction is surging, particularly luxury residential, compared to the collapse in the residential market due to the onset of the financial crisis in 2008.
“Residential is continuing to increase rather dramatically. By 2015 residential spending alone will be $10 billion,” said Anderson.
Anderson pointed out that demand for luxury housing is partly fueling the fast-paced residential spending.
“This is very much a high-end driven market. The hope is that it will continue to the outer boroughs and take into account more affordable units.”
The Congress also forecasts non-residential spending to reach $10.3 billion in 2013, $10.8 billion in 2014 and $13.6 billion in 2015.
“It’s a big market. We had a big surge in the mid-2000s before flattening out and then declining, but it’s now strongly rebounding,” Anderson said
While the Congress is optimistic about spending in the non-residential sector through 2015, they are worried about the concentration of office space being relegated to just two Manhattan locations—the World Trade Center and the West Side’s Hudson Yards.
“The thing that’s a little disquieting to me is that 94 percent of all office activity is taking place in only two locations. We don’t have a diversified New York City office construction market. This is why the East Midtown rezoning initiative is so important,” said Anderson. (The city is proposing to rezone a 73-block area surrounding Grand Central Terminal in order to build new, state-of-the-art commercial buildings.)
The Congress’ forecast is not set in stone. It’s based on a couple of assumptions such as a recovery of the overall economy. Indeed, the Congress warns that office construction is dependent upon new tenants leasing space at 3 World Trade Center and the Hudson Yards’ South Office Tower, both currently under construction.
Also worrisome to the Congress is an unfunded MTA Capital Program. The current program is funded through October 2014, but no sources of new funding other than federal money has been identified for the next capital plan.
Anderson told the audience that the Congress is really worried about a decline in government spending, particularly on infrastructure, because the overall health of the city’s construction industry remains very dependent on government work to support private sector economic activity.
“Infrastructure spending….is the surest path to economic development. We’ve spent almost $100 billion since 1982 in MTA Capital Programs and it has really delivered for this metropolitan area,” Anderson said.
With no dedicated state or city funds earmarked for the MTA’s next capital plan, Anderson implored the audience to work together to make sure there’s no more degradation of the MTA Payroll Mobility Tax.
“We need more dedicated money to help fund the MTA and other capital programs and the payroll mobility tax is very important to continue and to resist those who would emasculate it,” Anderson said.
In an interview Mr. Anderson said that the next mayor has to decide whether infrastructure is a priority for him.
“The state and the city have to come up with money to support the MTA long term.”