Annual Report 2009
New Directions
For most New Yorkers, 2008 will be remembered for the stunning swiftness with which the overall economy deteriorated. New York's financial sector, in particular, was seemingly transformed and downsized within the blink of an eye.
In that context, few may remember that 2008 was a record-setting year for our industry. Construction spending increased some 16 percent over the prior year and industry employment topped 130,000. In fact, for the second time this decade, the building industry helped bolster the faltering local economy while preparing the region for future growth.
Modern office marvels, such as One Bryant Park and the Goldman Sachs headquarters, marched steadily toward completion while government invested billions of dollars on a range of critical infrastructure needs, including public schools and mass transit upgrades. The residential building boom, spurred in large part by recent rezoning initiatives, continued apace in all five boroughs. Bedrock New York City institutions, such as NYU and Lincoln Center, pushed forward with major expansion projects.
Despite the overall breadth of activity, inevitable declines set in throughout the industry at the end of the year, and many signs point toward more to come. Project cancellations already top several billion dollars, and design work is dropping everywhere.
It is likely that our City, our economy, and our industry will be faced with extraordinary challenges in the coming months and years. These challenges will need to be met with innovation in every sector of the industry and by our government leaders.
Fortunately, lasting positive change is often a major outgrowth of periods of extreme difficulty.
The boom years showed us that our industry and our City can still improve in key areas, such as overall construction costs, site safety, and the ability to partner with government and communities to enact smart, forward-looking investments in neighborhoods and increase infrastructure capacity.
In that light, it is important that each arm of the building industry-along with government, civic leaders, and the larger business community-use the coming months to ensure that New York City is positioned to immediately resume building for the future once the economy begins to rebound.
Controlling Construction Costs
As the Building Congress documented in its comprehensive 2008 report, New York's Rising Construction Costs: Issues and Solutions, our industry can take little pride in being the nation's most expensive construction market. Everything from land and labor, to government regulation and building materials, are costlier here than elsewhere. The solutions must be broadbased and rely on government, management, and labor.
Industry labor and management organizations have taken an important step with recent negotiations to reduce overall labor costs. In addition, City government, led by Deputy Mayor Robert C. Lieber, has implemented measures to cut needless red tape. These are positive developments, but they must be viewed as the initial steps of a larger process, involving all sectors of government and the building industry, to moderate our highcost environment.
Advocating Critical Investments
When budgets are stretched and revenues begin to dissipate, as is the case today, the temptation among elected officials is to preserve the operating budget rather than the capital budget, where payoffs are measured in years and decades. During New York's last fiscal crisis in the 1970s, virtually all capital spending was eliminated for a period of time. As this industry and the business community know, our City paid an exorbitant price as a result of this shortsighted governance.
While some immediate reductions in capital expenditures may be expected, it is up to our industry to ensure these cuts are prudent and short-lived. We can do this, in part, by fostering greater understanding of the City's real capital needs coupled with a debate on innovative strategies to fund these investments.
This industry must make the case that infrastructure investment is the lifeline of the economy. It creates and attracts jobs, stimulates private investment in neighborhoods and businesses, generates tax revenue, and forges lasting quality-of-life improvements that can secure New York's competitive position in the global marketplace. Now more than ever, every effort should be made to insulate government capital plans from the pressures to balance the City's current-year and future budgets.
In addition to championing this cause, industry professionals must press New York City and State leadership to explore and implement new dedicated and recurring sources of infrastructure financing, such as those successfully employed by the New York City Municipal Water Finance Authority. The recent defeat of suggested tolls on the City's East River bridges to help fund MTA capital projects only adds urgency to this effort. With such an approach, New York will be able to invest in, and create for, today as well as the generations to come.
Safeguarding the Public
Tens of billions of dollars worth of construction is accomplished annually in New York City with minimal disruption or danger to the millions of people who live, work, and visit the world's leading center of commerce, tourism, and culture.
To be able to conduct all of this construction activity, as a thriving metropolis continues about its business, is a testament to the ability of government, architects, builders, engineers, and countless others to work cooperatively and with a shared mission to get the job done safely.
Despite this shared purpose and attention to safety, however, New York City residents witnessed some serious construction accidents with tragic consequences early in 2008. It was a stark reminder that we can never let our guard down when it comes to the ongoing safety of workers and the community at large. Over the coming months, as this industry grapples with a falling economy and inevitable construction slowdown, we must resist the temptation to place all of our focus on the challenges associated with decline. The current environment is also a perfect time to be examining the effectiveness of the New York City Department of Building's regulations and staffing levels, exploring new safety technologies, analyzing work rules, and working to eliminate red tape that adds to costs without impacting overall safety.
Preparing for Future Growth
Thanks to recent actions by government, particularly the Bloomberg administration, there will be many opportunities to build as the economy rebounds. This is the result of a series of enlightened rezonings affecting nearly one-sixth of New York City. In addition, approvals are in place and developers selected for massive undertakings such as the World Trade Center, Atlantic Yards, Hudson Yards, and the former Con Edison eastside site.
Furthermore, major institutions such as Columbia University, Saint Vincent's Hospital, and the United Nations, are eager to embark on major expansion and redevelopment plans. If government is willing to make critical investments in major infrastructure systems, it remains conceivable that construction spending and employment could return to record-setting levels in a relatively short period of time. In fact, to monitor this, the Building Congress and the New York Building Foundation are initiating an expanded research effort this year to track construction activity and other industry-related economic indicators, providing real data to moderate the anecdotes and misinformation that can be generated during uncertain times.
Building for growth requires government, the industry, and local communities working cooperatively to invest in sensible and sustainable growth in the years to come. This means a continuation of the current rezoning strategy and an easing of onerous mandates on private investment that make development cost prohibitive. It requires that government work to expand opportunities for investment, such as in former brownfields.
Today, New York City remains at the forefront of global commerce and culture. Thanks in large part to the efforts of this industry, New York has participated in a decade of unprecedented transformation.
As difficult as the challenges may be in the near term, all the ingredients are here for New York's continued global leadership and evolution as a premiere 21st century international city. As long as we use this period to work together in addressing our most pressing challenges as a City and as an industry, New York's potential will remain almost limitless.
