Big Apple Construction Activity to Remain Strong

Despite this year’s nationwide economic downturn, the credit crunch and the recent banking industry implosion, the building frenzy in New York City continues. As per a new report by the New York Building Congress, 2008 will be a banner year, and 2009 won’t be too shabby, either. However, even a town with one of the strongest commercial and multi-family real estate markets in the country will not completely escape the nation’s economic ills. According to the forecast by the Building Congress, construction spending among government, business and institutional entities in New York City’s five boroughs will grow to a record $33.8 billion this year, marking a 16 percent increase over $29.1 billion in spending in 2007. Flying in the face of the nation’s economic challenges, the city is on schedule to break new records for both construction spending and employment in 2008. Next year looks good, too, as spending is anticipated to reach $33.4 billion in 2009 and construction employment is expected to hold steady. “New York City has had strong demand in residential and non-residential sectors, and very strong public construction endeavors, so when you put that together, it’s an industry that’s been booming from every standpoint,” Richard Anderson (pictured), Building Congress president, told CPN. “As it turns out, 2008 will be our best year ever. The construction industry lags the overall economy. When things lag, you don’t turn off construction projects mid-stream.” However, all good things must come to an end–at least for a little while. “We expect next year there will be a modest decline as a lot of work winds down, and in 2010, we expect significant decline,” Anderson noted. Construction spending is on target to drop to $26.2 billion in 2010. Undoubtedly, recent national financial woes will have an impact on New York City’s construction industry. “There are two scenarios, Anderson said, “a relatively soft landing that’s significant but not off the cliff, or off the cliff.” Speculating, he remarked that the latter is the least likely scenario. “It will be that precipitous only if credit markets don’t get reopened and if there’s a global economic recession of significant magnitude. It’s more likely that there will be a soft landing because credit markets will be taken care of. But even if the economic decline is significant, New York City will still be ahead of the game. The question is public spending, and that comes to a head with the Metropolitan Transportation Authority’s five-year program, which is up for renewal next year.” Regardless, Anderson does not anticipate a real estate glut on the horizon. “There was a time when there was a surplus of office space and housing, but we don’t see that,” he said. “Demand is strong, just not white hot like it was before.”