NYC Construction Slowdown Seen in 2010

NEW YORK CITY-The current economic downturn could lead to a drop in overall construction spending here over the next two years, with a sharp dip taking place in 2010, according to a report by the New York Building Congress released today. Spending, predicted to top out at a record $33.8 billion this year, is projected to drop to $33.4 billion next year, and then take a deeper dive to $26.2 billion in 2010.

The cuts are seen coming from across the board. Government, residential and commercial building is all expected to slow down.

But when announcing the results at a presentation in Midtown this morning, Richard Anderson, the Building Congress’ president, pointed out that $26.2 billion is still a significant number and would surpass the total in 2006.

“By historic standards that’s still pretty high,” he said. “It’s not the bottom falling out of the construction market.”

This year alone has marked a 16% increase in spending over what was allocated in 2007. Additionally, the 35,700 new residential units being built this year are the most since the Congress began tracking activity in 2000 and were up from 31,900 in 2007.

In the commercial real estate realm, including offices, institutional space and sports-entertainment venues, an increase to $11.5 billion is forecast for 2009, up from this year’s $10 billion. By 2010, though, spending is seen falling to $7.1 billion. But numbers for office-building spending are set to increase by $1 billion by 2010, up from this year’s estimate of just over $3.5 billion.

But officials did not downplay the challenges in the industry is facing. Layoffs in the financial sector, which accounts for 15% of the city’s private-sector employees yet 40% of its wages, have challenged the market, said Seth Pinsky, president of the New York City Economic Development Corp.

Future actions the city can take include helping developers with financing structures and stretching major projects out over longer periods of time. “We have to be smarter about he we do the projects we plan on doing,” Pinsky said.

In the report, the New York Building Congress, recommended the following steps to ensure that New York City builds for growth, in good times and through down cycles: Identify and implement dedicated sources of funding for the Metropolitan Transportation Authority’s capital program; affirm and extend other dedicated sources of revenue for capital budget priorities; government must be an ally, rather than a hindrance, as major institutions move forward with critical expansion plans; the industry needs to work cooperatively with government in coming to grips with the rising cost of construction in New York City; and the next Mayoral administration needs to extend the successful strategy of the Bloomberg administration to strategically rezone neighborhoods.

“Much of the funding for near-term government projects, which represent more than half of all construction spending, has been allocated and committed,” said Anderson. “However, it is likely that some portion of these projects will be stretched out or deferred, if fiscal and economic problems worsen.”

Similarly, the report notes that major office tower construction already in the pipeline is likely to sustain current estimates. In fact, construction has begun on the majority of the 15 office towers factored into the 2009 and 2010 estimates.

Additional reporting by Natalie Dolce.