Construction spending in New York City is being taken for a roller-coaster ride, with spending projected to increase this year by 26% from 2020, then dip by $4 billion by 2023, according to an analysis by the New York Building Congress.
Much of the decline in construction investment is because of a retraction in government spending, which will fall by $500 million, and a drop in residential building projects, where 21% fewer units will be constructed by 2023.
The total amount of floor space built across all types of real estate is expected to drop from 74.2 million square feet this year to 61.3 million square feet.
“Am I concerned about the numbers in this report? Yes,” said Lou Coletti, president of the Building Trades Employers’ Association, adding that he’s especially worried because construction and real estate are responsible for producing 20% of the city’s gross domestic product.
The Building Congress predicts more than $60 billion will be spent on projects by the end of this year, but it notes that’s still $1.4 billion less than was shelled out in 2019. The slowdown in spending growth can also be attributed to the 11 weeks at the start of the pandemic when non-essential construction was shut down, resulting in delays and higher costs to get work done on time.
In 2020, spending fell nearly $14 billion from the $62 billion reported in 2019.
“We have been fortunate to be where we are today because contractors are working off a backlog,” Coletti said.
“We’re coming in at a level that I’m not sure we as an industry thought we would be at,” added Elizabeth Velez, chairwoman of the Building Congress.
“The interior market is surprisingly strong because people are adjusting their workplaces to fit the new environment,” Coletti said. “Offices will look very different.”
Overall spending on commercial real estate including offices, retail, hotels, entertainment and recreation, will dip from $23.7 billion this year to $22.4 billion next year before reaching $25 billion in 2023.
For contractors, the report offers hope. Employment in the industry is at its lowest level since 2014, but the Building Congress predicts the number of jobs will increase 16% by 2023. That would be the third-highest level of employment since 1995, when the data was first collected.
“It’s clear that confidence in New York City’s construction and real estate industries remains high, and for good reason,” said Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York.