Office Projects Make Up More Than Half of All NYC Commercial Construction

NEW YORK CITY—Office building construction over the past three years has dominated the building sector in New York City, accounting for 54% of all commercial construction during that period.

The New York Building Congress in a report released today notes that in the last three years new office construction reached a record high, each year exceeding $2 billion in construction starts, bolstered by new development in Hudson Yards and the World Trade Center.

Commercial construction totaled $23.8 billion between 2013 and 2017, yielding a total of more than 73 million new square feet of space. The last three years showed the strongest growth, with each year topping $5 billion and 16 million square feet of new commercial construction, the New York Building Congress states in the report based on Dodge Data & Analytics data.

While office construction led in market share, the Building Congress stresses that all major commercial sectors—hotels, retail and warehouse—all are experiencing significant growth.

“As more businesses continue to call New York home, building new, world-class commercial spaces is more important than ever,” says New York Building Congress president and CEO Carlo A. Scissura. “New York City’s economy has never relied on a single industry or sector and the variety of commercial construction across the city ensures our businesses can adapt and thrive in the 21st century.”

Retail construction work, which includes stores and restaurants, totaled $2.8 billion between 2013 and 2017 and accounted for 12% of all commercial construction over that time. The sector has experienced consistent growth each year, adding more than 1 million square feet of new retail space across the five boroughs. Manhattan retail construction remains high, but work in Staten Island and Brooklyn has been major retail market drivers, according to the Building Congress.

The hotel sector accounted for more than $4.7 billion in work between 2013 and 2017, earning a 20% share of commercial construction during that period. The last five years in New York City has seen the hotel industry adding 15 million square feet of new space. The Building Congress notes that in the past 10 years there has been an impressive 32% increase in hotel rooms in New York City. Presently, there are more than 115,500 hotel rooms and 630 hotel properties in the five boroughs.

A burgeoning sector in the city is commercial warehouse construction. The Building Congress states that work on commercial warehouses (excluding manufacturer-owned spaces, totaled $2 billion between 2013 and 2017 and accounted for 8 % of all commercial construction over that time.

The city has seen warehouse construction rise from 880,000 square feet in 2013 to more than 4 million square feet in 2017, driven in large part by demand from the e-commerce and rapid delivery logistics industries.

While the report was bullish on the construction sector in the city at the moment, a national construction trades organization reports construction costs nationwide are rising and tariffs imposed by the Trump administration could drive prices even higher.

The Associated General Contractors of America reports today that that cost for all goods used in construction rose 8.8% in May 2018 as compared to a year earlier, which was the largest increase in almost seven years. In particular, costs for building and road materials rose sharply last month, they add.

“Prices jumped at double-digit annual rates for metals, lumber and plywood, and diesel fuel, while ready-mixed concrete, asphalt paving and roofing materials also had unusually large increases,” says the Associated General Contractors of America chief economist, Ken Simonson.

The U.S. imposed steel and aluminum tariffs on imports from Canada, Mexico and the European Union on May 31. The impact from these tariffs was not reflected yet in the most recent data, according to the association. Simonson says that construction contractors are facing “a severe squeeze on costs for both ongoing and new projects. Moreover, tariffs imposed on steel and aluminum since this data was collected in mid-May are likely to drive contractors’ costs still higher.”