Projected Construction Spending in New York to Decrease after 2008, Following National Trend
- Oct 16, 2008
By Erika Schnitzer, Associate EditorNew York–Construction spending for new buildings in New York will increase this year before it drops slightly in 2009 and significantly in 2010, according to a report by the New York Building Congress, entitled “New York City Construction Outlook 2008-2010.”Spending is forecast to reach a high of $33.8 billion in 2008—a 16 percent increase from the previous year—and dip to $33.4 billion in 2009 before it drops to $26.2 billion in 2010. Employment will peak at 130,100 construction workers in 2008 and is expected to drop to 100,250 in 2010—the smallest industry workforce since 1997.For the residential sector, the New York Building Congress forecasts production of 35,700 units this year. “It’s by far the greatest year in New York City in more than 40 years, which is a surprise because on the residential side, everyone thought the market would level off and decline,” Richard T. Anderson, president of the New York Building Congress, tells MHN, explaining this year’s spike in residential construction is partly as a result of the 421(a) tax incentive program expiration this past July 1.The Building Congress’ forecast is that by 2010, residential construction in New York will be half of what it is today. “Demand is tapering off for a variety of reasons. Housing is not the bargain it once was in New York (for foreign investors),” notes Anderson.While the report cannot evaluate how the state of the economy will impact these forecasts, Anderson says the Building Congress has developed two possible scenarios: “a soft landing that realizes the more moderate forecast or a much harder landing where capital programs of government are slashed and the bottom falls out of residential and commercial markets.”“We’ve certainly lagged the rest of the country but whether we follow the country is open to question, but our estimate is we will not decline as much as the rest of the country,” says Anderson.And just how much is that? According to FMI’s 2009 U.S. Market Construction Overview, construction is down 15 percent in 2008 to $42.5 billion and is expected to continue to decrease 5 percent through 2009. The glimmer of a silver lining will come in 2010 and 2011, with an expected growth of 3 percent in each year. Regionally, New England multifamily construction is projected to be the weakest in 2009, with elevated prices for materials, transportation and energy impacting nonresidential construction. Multifamily construction put in place is expected to decrease 10 percent in the next year. In the middle Atlantic region, luxury housing appears to be remaining stable and construction is expected to decrease only 3 percent in 2009. Two percent decreases are expected for both the south Atlantic region and the west south central region.The following 10 industry trends will serve as future drivers, according to the 2009 U.S. Market Construction Overview:• Energy sourcing and use,• Capital supply suffers,• Workforce losses,• Climate changes,• Rising construction costs,• Business demises,• Speed of change,• Green building,• Buyers’ increased construction knowledge, and• Global marketplace.