Boom in spending by private sector, especially for residential projects, is expected to drive the total up 6.2% this year and by a whopping 17% next year—to a point just 2% below the peak in 2007 in real terms.
BY MATT CHABAN
|Construction spending is expected to reach $32 billion this year, according to the New York City Building Congress.|
Construction spending is expected to reach $32 billion this year, according to the New York City Building Congress. That is a 6.2% increase over last year. Next year construction spending is predicted soar by 17% next year, to $37.3 billion. That is just 2% below spending levels in 2007, when adjusted for inflation.
"It's amazing, because this recovery is being driven by the private sector, which we had not expected," said Building Congress president Richard Anderson.
Leading that charge is a remarkable rebound in residential construction, which is expected to build 13,800 units this year and 16,900 next year. That is up from 11,000 last year and a sclerotic 6,000 units at the depths of the recession in 2009. And the dollars being pumped into the economy are more, as well, since developers are taking on more expensive and complicated high-rise projects. Residential spending will reach $6 billion this year and $8 billion next—more than four times the $2.3 billion spent in 2010.
This means not only good news for New Yorkers desperately seeking apartments but also construction workers, who had long been out of work. And yet residential construction has not quite reached pre-recession levels, when 30,000 units were being built a year for four consecutive years, from 2004 to 2007.
"I don't think it's a bubble because you're seeing strength in a number of sectors," Mr. Anderson said.
Construction employment across all sectors is expected to reach 120,000 jobs this year, up from 115,000 last year, while 10,000 more jobs are predicted to be added next year.
Another important factor is institutional work, which has been strong the past few years as hospitals, universities and other private universities have continued to expand. Commercial construction, of offices, hotels and retail spaces, continues to grow, as well, as the economy in general, and the tourist economy in particular, strengthens. Overall, non-residential private spending will grow 38% this year, to $13.5 billion, from $9.8 billion, and it will expand a further $2 billion next year, according to projections.
The one weak spot is government work, though even it has remained stronger than expected. In 2009 and 2010, the industry was woefully dependent on public sector work, which accounted for nearly two-thirds of all projects. Now, at $12.4 billion in 2013 spending, it has fallen to 40% of the market. Last year, public spending was $15.1 billion. There is some anticipated growth in 2014, to $13.8 billion.
The latest construction estimates are the mid-year update of the New York Building Congress' annual Construction Outlook, which is released in October, and it shows significant promise because the numbers have been upgraded significantly from previous estimates, when construction was predicted to only reach $30.2 billion, about $1.8 billion below the new estimate. Furthermore, the market was expected to contract in 2014, to $29.1 billion, rather than the new estimate of $37.3 billion.
Mr. Anderson credits the city itself. "I think fundamentally, it's New York," he said. "There's a lot of confidence in the future of the city. People are living here, they're buying here, they're working here, institutions are investing. People are putting money into the city because they believe in the city."