NEW YORK CITY-Sparked by a sharp increase in new residential projects, New York City construction starts reached $16.1 billion in 2012, a 5% increase from 2011, according to a New York Building Congress analysis of McGraw-Hill Construction Dodge construction data. 

Residential construction starts reached $5.1 billion in value in 2012, a 54% increase from 2011, when construction starts reached $3.3 billion, and more than double the total ($2.3 billion) for 2010. 

“The strength of the NYC residential market continues to impress,” Richard Anderson, NYBC president, tells GlobeSt.com. “It fell off the cliff in late 2008, after we were in excess of 30,000 a year for five straight years and then in 2009 we had 6,000. This year it could reach 15,000.”

So why is it soaring, and why not higher? “Reaching 30,000 for five consecutive years was unprecedented,” Anderson notes. “It was the combination of a lot of factors and some of those are reestablishing themselves, particularly demand from overseas buyers. Plus a lot of people want to be in New York, while some renters are becoming buyers because interest rates are low.”

Meanwhile, the non-residential sector—which includes offices, hotels, schools, hospitals, transit stations, power plants and other institutional buildings—fell. Construction starts in this sector declined 7% from $9.6 billion in 2011 to $8.9 billion in 2012. However, Anderson notes: “The difference could be one project start.”

Construction starts in the public works sector, which includes all government “non-building” construction starts—such as roads, bridges, water systems and other infrastructure—declined 12%, from $2.4 billion in 2011 to $2.1 billion in 2012.  Starts in this sector have declined in each of the past four years and are down 62 percent from 2008, when public starts reached $5.7 billion. 

Through November, 80 percent of all 2012 residential project starts involved new ground-up construction; up from 70 percent in 2011.  The opposite was true for commercial buildings where 73 percent of all initiated projects entailed alterations and renovations to existing structures. 

Still, says Anderson, "I don't think there were any real signs of weakenss."

In terms of the biggest project starts, a $400 million renovation of Macy's Herald Square took the top spot this year, followed by the MTA's $325 million project to construct entrances for the 96th Street station of the 2nd Avenue Subway. A $250 million renovation of another retail hub, the Winter Garden in Lower Manhattan, took third place.

These were followed by a $242 million project related to construction of the third Water Tunnel, a $235 million redevelopment of Goldwater North Memorial Hospital, and a $225 million park and public space project on Governors Island.

Of the top 15 projects by value, four were in the high-rise residential category, led by the $211 million Avalon West Chelsea development and the $200 million Baccarat Luxury Hotel and Condominium.

Office building developers and analysts shouldn't lose faith in the sector just because no buildings in that asset class made the top 15 projects list, Anderson says in a statement on the results. “While office buildings were conspicuously absent from the top projects list, the sector is off to a very promising start to 2013.  Work recently began on Related's first Hudson Yards tower and Brookfield has broken ground on a rail platform for its Manhattan West project, which will include up to four million square feet of office space,” he says.

“Finally," he continues, "recent news reports indicate that Silverstein Properties is in discussions with several major tenants for space in 3 World Trade Center.  If one or more leases are signed, it is possible that construction on the tower portion of that 2.5 million square foot building can begin in 2013.”

The data used in this report encompass all project starts between 2008 and 2012, including brand new construction as well as alterations and renovations to existing structures.  The data reflect the total estimated value of each initiated project through the entire period of construction.