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In a continuation of a remarkable trend of accelerating growth in building activity, total construction spending in New York City by businesses, government and institutions is expected to reach $26.2 billion in 2007, according to New York City Construction Outlook 2007-2009, an annual forecast and analysis prepared by the New York Building Congress. The report was released in October at a Construction Industry Forum featuring New York City Economic Development Corporation President Robert C. Lieber.
This marks the seventh and strongest forecast produced by the New York Building Congress. While overall construction spending reached a record $24.6 billion in 2006, the Building Congress forecasts spending of $26.2 billion in 2007, $27.5 billion in 2008, and $29 billion in 2009, for a three-year forecast of $83 billion. If realized, this would represent an 18 percent increase in annual spending over the three-year period.
“ The ongoing building activity in the five boroughs of New York City is the result of an industry
in which every sector is booming,” said Building Congress Chairman Dominick M. Servedio, who is Chairman/CEO of STV, Inc. “ Office construction is white hot. New York’s continued strength in the housing market continues to defy the national trend. All levels of government
are undertaking major, multi-year investments in infrastructure improvements, and bedrock institutions, including universities and cultural institutions, are continuing to expand.”
The non-residential sector, which includes office construction, has experienced the biggest
percentage increases in recent years, a trend that will continue through 2009. After modest growth in 2004 and 2005, annual construction in this sector is surging – with spending more than doubling between 2005 (actual spending of $4.1 billion) and 2007 (projected at $8.3
billion). Even at these numbers, this sector has not yet peaked. Citywide non-residential
construction is forecast to reach $9.5 billion in 2008 and $11.2 billion in 2009.
An analysis of the data finds that New York City is defying the nationwide slump in housing construction. Residential spending in New York City, which reached $4.9 billion in 2006, is
projected to climb to $5.6 billion in 2007, before leveling off at approximately $5.5 billion in 2008 and $5.2 billion in 2009. Residential spending in 2007 is expected to produce more than 35,000 dwelling units. By comparison, approximately 9,000 new units were produced in 1997 and just five years ago, in 2002, that number stood at 18,500.
“Historically, the relationship between residential and non-residential construction has been that one sector surges ahead while the other takes a back seat,” said Building Congress President Richard T. Anderson. “Today, New York City is experiencing a prolonged period in which the economy is firing on all cylinders and feeding construction activity in all sectors. New and modern office space is being readied for businesses of all sizes while, at the same time, housing stock is increasing to accommodate more workers.”
Based on a review of the latest multi-year capital plans and recent spending, government
construction is projected to reach $12.3 billion in 2007, an increase from $11.9 billion in 2006. The Building Congress projects capital spending, including investments in mass transit, public schools, roads, bridges and other essential infrastructure, to reach $12.6 billion in 2008 and 2009.
Construction employment, which reached 116,600 jobs in 2006, is projected to increase to 122,600 in 2007, 126,700 in 2008, and top 130,000 in 2009.
According to the report, all of the current indicators are so positive that it is hard to envision a significant deterioration in construction activity during the forecast period. Most of the major public construction projects are adequately funded through 2009, and the majority of major office construction projects, such as Goldman Sachs and the World Trade Center site, are not dependent upon swings in the economy.
Mr. Anderson noted, however, “ There is no mistaking the warning signs on the economic
horizon and the potential negative impact of a worsening national economy and tighter credit markets. While New York City has worked hard to diversify its economy, the financial and real estate sectors still play an outsized role. A prolonged slump on Wall Street would decrease tax revenues and likely create downward pressure on the region’s capital programs.”
In its forecast report, the Building Congress notes that it will be important to keep an eye on
the effects of such intense demand for construction labor and materials. While the appetite for
construction has not yet shown signs of abating as a result of construction costs, which are
rising at about one percent per month, the question remains at what point developers and
government might find building in New York City to be cost-prohibitive and start scaling back.
The New York Building Congress and the Building Foundation prepared Construction Outlook with the assistance of Regina B. Armstrong of Urbanomics, an economic consulting firm. It incorporates reviews of private construction data as well as public capital budgets and plans at the City, State and Federal levels. The full report can be viewed at www.buildingcongress.com.