Anderson: “The big question is whether this pace can be sustained once all the projects in the pipeline have been completed.”
NEW YORK CITY—Thanks to continued strong demand for new residences and offices—along with a rebound in government infrastructure investment—local construction spending is approaching or exceeding record levels, according to a new report by the New York Building Congress, with support from the New York Building Foundation.
NYBC forecasts construction spending here of $43.1 billion in 2016. This represents a 26% increase from 2015, when spending reached $34.3 billion. The Building Congress anticipates the current building boom to continue through the next two years, with $42.1 billion in construction spending projected for 2017 and $42.3 billion in 2018.
This indicates that the current building boom is being driven far more by private sector investment than the previous construction surge of 2007, according to NYBC, when spending was split almost evenly between the government and private sectors.
The Building Congress forecasts $13.4 billion in residential construction spending in 2016, which would mark the third consecutive record-breaking year. Residential spending—which includes spending on new construction as well as alterations and renovations to existing buildings—reached $12.7 billion in 2015 and $12 billion in 2014.
While overall residential spending is expected to increase, the number of new housing units produced is forecast to decline from 36,850 units last year to 31,300 in 2016. Looking ahead, the Building Congress forecast calls for 27,000 new units and $13.1 billion of residential spending in 2017, and 25,000 units and $12.7 billion in spending in 2018.
“More than $50 billion in residential spending and the construction of 120,000 new housing units throughout the five boroughs are expected over the four-year period from 2015 through 2018,” notes Building Congress president Richard T. Anderson. “The big question is whether this pace can be sustained once all the projects in the pipeline have been completed. It is going to be very tough, if not impossible, without a renewal of the 421-a tax reduction program—or better progress on the De Blasio's administration's rezoning efforts—to accommodate greater density and more affordable units.”
Non-residential construction spending, which includes office space, institutional development, government buildings, sports/entertainment venues, and hotels, is projected to skyrocket to $17 billion in 2016, a 27% increase from a year ago when spending reached $13.4 billion. If the numbers hold, it would be the highest level of inflation-adjusted, non-residential spending in more than two decades and just the fourth time that nominal spending has topped $10 billion.
The Building Congress forecasts continued strength in the non-residential sector, with spending expected to reach $14.8 billion in 2017 and $15.6 billion in 2018.
“While the non-residential sector has benefited from spending on hotels and hospitals, as well as colleges and universities, the big story is office construction, which is at its highest level in more than a quarter of a century,” says Building Congress Chairman Richard Cavallaro. “We estimate that 11.6 million square feet of office space will be constructed in Manhattan during the forecast period, with millions of additional square feet anticipated in Brooklyn and Queens.”
Meanwhile, government spending on public works is forecast to reach $12.7 billion in 2016, a 56% increase from 2015, when spending dipped to $8.1 billion. Spending in the sector is expected to reach $14.3 billion in 2017 and $14.1 billion in 2018.
The city is forecast to spend $6.7 billion on infrastructure projects in 2016, nearly double the $3.4 billion spent in 2015. Construction spending by the Metropolitan Transportation Authority is expected to increase to $3.9 billion this year from $2.8 billion in 2015.
“Government spending on infrastructure has fallen in each of the past seven years,” notes Building Foundation chairman John Dionisio. “This is a cause for concern given the additional demands that have been placed on the city's infrastructure by record levels of private sector growth. The good news is, it appears that downward trend will be reversed starting in 2016.”
Based on its findings, the NYBC has made a number of recommendations. Check back with GlobeSt.com tomorrow to find out what was suggested.
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
