Institutions Outspend Owners on Construction

NEW YORK CITY-Amid the economic downturn, educational, healthcare and cultural institutions have outspent private sector office and multifamily owners on new construction starts across the city, the New York Building Congress says in a report released Monday. Richard T. Anderson, Building Congress president, notes in the report that demand for public and private institutions’ services is less dependent on the overall economy than the office and residential sectors, and he expects the healthy spending patterns to continue.

“The signs of continued investment abound,” Anderson says in the report. “Columbia, NYU and Fordham have unveiled detailed campus expansion plans that will stretch for years. CUNY has more than $1 billion in projects in varying stages of development. The Whitney Museum is moving forward with construction of a new museum building near the High Line. In addition, the New York City Department of Education has commitments for $9 billion over the next four years to modernize its teaching facilities while adding 30,000 new seats in 56 buildings across all five boroughs.”

Over a two-year period from May 2008 to April of this year, institutions began $8.1 billion in construction projects. The public sector led the way with 60% of these starts, or $4.87 billion of the total. Private institutions accounted for $3.28 billion in project starts during the two-year period, the Building Congress says.

That tally is about twice the level of spending on office construction in the same time frame, and the gap is even wider when looking at year-to-date numbers. The value of institutional construction starts reached $1.1 billion from January to April of this year, more than three times the $325 million in new starts during the first four months of 2009. By contrast, office construction citywide totaled just $163 million over the first four months of 2010, while residential permits declined 82% last year compared to 2008, according to previous Building Congress reports.

Led by Weill Cornell Medical College’s $650-million medical research building, the hospitals and healthcare sector provided the bulk of the YTD starts. Another factor driving activity in the institutional arena has been the increase of employment by colleges, universities, elementary and secondary schools, healthcare institutions and cultural facilities. It topped 700,000 for the first time in 2010, increasing to 713,000 from the 696,000 in ’09.

Over the May ’08-April ’10 span, the education sector accounted for 56% of the value of all construction starts. The New York City School Construction Authority outspent the private sector on elementary and secondary school projects by a factor of nearly 20 to 1: $3.1 billion in public school projects, compared to $174 million in starts by private schools. The balance was reversed, if not in quite as lopsided a fashion, for institutions of higher learning: private colleges and universities generated $744 million in starts, while the public sector accounted for $540 million.

Hospitals and other healthcare facilities produced another $1.96 billion in construction starts during the two-year time period, with private institutions accounting for $1.4 billion of that total. Cultural institutions began another $764 million in construction projects during that time, followed by court facilities with $600 million.