New York City’s long-running building boom will peak this year, before new office and residential projects peter out in the coming years and the number of construction jobs plummets 23 percent to 100,250 in 2010, according to a report released on Tuesday by the New York Building Congress.
The building congress, a trade group for construction and real estate companies, estimates that construction spending on new housing, office towers, stadiums, subway tunnels and schools will decline slightly in 2009 before falling to $26.2 billion in 2010, from $33.8 billion this year. But even that forecast may be a bit optimistic.
The report noted that construction has already begun on “the majority of the 15 office towers factored into the 2009 and 2010 estimates.” But at least one-third of those projects are already in doubt, given the flagging economy, turmoil on Wall Street and the virtual disappearance of construction financing for new projects.
Few if any real estate and construction executives believe that JPMorgan Chase will build a new tower downtown, at Greenwich and Cedar Streets, after buying Bear Stearns and its Midtown headquarters.
Vornado Realty Trust, one of the city’s biggest commercial landlords, has suspended its plan to build a 23-story, $435 million headquarters the Major League Baseball’s cable network, after it failed to secure additional tenants and financing. Vornado’s effort to build a 1.3 million square foot office tower over the Port Authority Bus Terminal on 42nd Street is also “dormant,” a company executive conceded.
“This is such an uncertain situation that it is almost impossible to say with confidence what the forecast for the construction market will be over the next several years,” said Richard T. Anderson, the building congress’s president. “That’s why we posed two scenarios.”
In the first instance, said Mr. Anderson, who delivered the report to a somber crowd of construction and real estate executives at the Hilton Hotel, the downturn is short-lived as the federal government steps in to ease the credit crunch, preserving thousands of jobs and projects.
But a more gloomy situation, he said, involves a prolonged downturn, with private projects coming to a standstill, while government slashes funding for mass transit projects, new schools and infrastructure. Currently, capital spending by city, state and federal governments accounts for about half of all construction activity in the city.
“You’ve just got to be optimistic,” Kenneth J. Knuckles, chief executive of the Upper Manhattan Empowerment Zone Development Corporation, whispered to the executive next to him during the presentation.
The warning signs, however, are everywhere. Unemployment is inching upward, and commercial landlords are nervously gauging the impact of the continuing consolidation of the city’s all-important financial industry.
Vacant space in the city’s office towers is no longer hard to find. In Midtown alone, more than 20.9 million square feet of space is available, according to the latest report by Newmark Knight Frank, a real estate broker. The availability rate — the amount of space vacant or available — rose to 10.2 percent in September, up from 8.2 percent a year ago.
Housing construction is also expected to slow drastically, after a spectacular four years in which new apartments, mostly condominiums, were built in virtually every neighborhood in the city. The boom was fueled by a growing demand for housing and the Bloomberg administration’s efforts to rezone areas like Williamsburg and the Far West Side of Manhattan for high-rise construction.
The report estimated that 35,700 housing units would be built this year, up from 31,900 last year. But by 2010, that number is expected to plunge to 18,500.
The report confirms that construction and real estate activity tends to be a lagging indicator of economic health. Projects that got under way in the last two years are going forward despite a flagging economy. But experts say that new projects are being delayed.
“The thing that’s reassuring is how much work is under way,” Mr. Anderson said. “This is a very large construction market.”
Even if construction spending falls to $26.2 billion in 2010, from an estimated $33.8 billion this year, that is still a considerable sum, he said.
The Goldman Sachs headquarters near ground zero is nearing completion, as is a tower at 42nd Street and Eighth Avenue and a smaller tower at 510 Madison Avenue in Midtown. The steel for the so-called Freedom Tower at ground zero is rising above street level, and uptown, Boston Properties says it will move forward with its proposed office tower at 55th Street and Eighth Avenue.
The big question, Mr. Anderson said, is whether the city and state will continue their commitment to capital spending on subway expansions, schools and other projects, or be forced to slash their budgets as tax revenues from Wall Street and real estate fall sharply.
The Bloomberg administration has already stretched out its four-year capital budget to five years. But Seth W. Pinsky, president of the city’s Economic Development Corporation, told construction executives on Tuesday that the Bloomberg administration would continue to maintain important city services and build for the future, with the redevelopment of Willets Point in Queens and the development of a large-scale affordable housing project at Hunters Point South, on the East River waterfront.
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