Monday, May 7, 2012

NYC Construction Spending Dropped Slightly in 2011

Residential Sector on the Mend as Government Spending Shrinks.Overall construction spending in New York City reached $27.4 billion in 2011, a 3.5 percent decline from 2010, when total spending reached $28.4 billion, according to a New York Building Congress analysis. Construction spending is down 12 percent, in current dollars, from the peak year of 2007. 

The Building Congress projects overall construction spending will reach $28.8 billion in 2012, before falling to $25.1 billion in 2013. This updated forecast shows a modest improvement from the initial October report, which primarily reflects significant anticipated increases in residential construction activity.

Government construction spending, which includes investments in mass transit, public schools, roads, bridges and other essential infrastructure, reached $14.4 billion in 2011 – down 10 percent from 2010 ($16.1 billion). Despite the decline, government construction still accounted for 53 percent of all construction spending in the five boroughs last year.

The near-term outlook, however, shows cause for considerable concern. The Building Congress forecasts government construction spending to decline to $12.7 billion in 2012 and $9.6 billion in 2013. If the projection holds, the 2013 numbers would represent a 40 percent decline in public sector spending from 2010.

The residential sector is anticipated to experience a remarkable reversal of fortunes. After bottoming out at $2.3 billion in 2010 (down from a peak of $6.4 billion in 2007), residential construction spending increased to $2.9 billion in 2011.
Better yet, the Building Congress is projecting a dramatic resurgence in residential construction in the coming years – with spending reaching $4.8 billion in 2012 before climbing to a non-inflation-adjusted record of $6.8 billion in 2013. The improved forecast is based on a preliminary review of recent residential permitting data.

Non-residential construction, which includes office space, institutional development, sports/entertainment venues and hotels, held steady – from $10.0 billion in 2010 to 10.1 billion in 2011. This sector was bolstered by ongoing work at the World Trade Center, Barclays Arena and Madison Square Garden.

The Building Congress forecasts non-residential construction to increase to $11.2 billion in 2012 before falling to $8.6 billion in 2013. At present, there are a fair number of large scale mixed-use projects that have been proposed and approved. Should the economy continue to improve, the developers for a portion of these projects may be able to obtain the financing necessary to get them started.

Construction employment averaged 111,500 jobs in 2011, down less than one percent from 112,400 jobs in 2010. Employment in this sector, however, remains down 16 percent from a peak of 131,400 jobs in 2008 and is at its lowest level since 2004. The Building Congress projects construction employment to increase to 120,800 in 2012, before dropping to 105,400 jobs in 2013.