NEW YORK - According to the New York City Construction Outlook 2008-2010, an annual forecast and analysis prepared by the New York Building Congress, New York City’s construction industry shows continued strength in all building sectors through 2009. Overall construction spending in 2008 is forecast to reach a record $33.8 billion, a 16 percent increase from 2007 when spending was $29.1 billion. Spending is currently forecast to reach $33.4 billion in 2009 before easing back to $26.2 billion in 2010.
“Given the ongoing turmoil in the credit markets, a slowing economy, and warnings of growing budget deficits, I am pleased to report that construction spending is expected to increase again in 2008 and, based on ongoing projects, could continue to be strong in 2009,” said Building Congress Chairman Stuart E. Graham, who is also chairman of Skanska USA. “With the industry poised to set new records for overall spending and employment in 2008, we expect to defy the odds once again and maintain our status as one of the region’s strongest economic engines.”
Graham added, “Of course, New York’s construction industry is not immune to downturns in the regional and national economy. While it is too early to assess how recent developments in the financial markets and resulting actions by the federal government might impact the numbers through 2009 and beyond, it is certain that the city’s economy will be further affected by recent losses on Wall Street and the continued tightening of the credit markets.”
According to the report, construction employment, which reached 127,000 in 2007, will peak at a record 130,100 workers in 2008. Total construction employment in 2009 is forecast to hold relatively steady at 128,300. However, an estimated drop in construction employment to 100,250 is expected in 2010. If realized, this would mark the smallest industry workforce since 1997. Of even greater concern is the potential for further declines in employment starting in 2009 and 2010 if recent economic events lead to a significant downturn.
Government projects remain the largest source and primary driver of construction activity in New York City. The Building Congress estimates that overall capital spending, which includes investments in public schools, will reach $17 billion in 2008, up from $15.8 billion in 2007 and $11.6 billion in 2006. Based on a review of current capital budgets and projected expenditures, spending in this sector may rise to $17.4 billion in 2009 before dropping to $14.4 billion in 2010.
For the fourth consecutive year, residential construction is forecast to exceed 30,000 new dwelling units in 2008. This level of work continues a trend for New York City, which did not produce more than 20,000 units annually from the 1990s through 2002. The Building Congress forecasts production of 35,700 units this year with a total construction value of $6.8 billion. This is up from 31,900 units ($5.3 billion) in 2007.
This spike is partially explained by a push from residential developers to get new projects started prior to a July 1, 2008, change in the 421(a) tax incentive program. The forecast calls for 20,285 units ($4.4 billion) to be produced in 2009 followed by 18,500 units ($4.66 billion) in 2010.
Nonresidential construction, including office space, institutional development, and sports/entertainment venues, remains a continued source of strength. Annual construction spending is currently forecast to increase by nearly 25 percent from 2007 ($8.1 billion) to 2008 ($10 billion), and increase again to more than $11.5 billion in 2009. Notably, this is more than triple the number achieved five years ago ($3.1 billion in 2003). But in 2010, spending in this category is forecast to drop to $7.1 billion. While this is a significant decline, the number, if it holds firm, still represents robust activity in this sector.
For more information, the full report can be viewed at www.buildingcongress.com.
Oct. 21, 2008: New York City Construction Expected to Be Strong Through 2009
October 21, 2008