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More than 700 stalled building sites coupled with three years of declines in spending have rocked the city's wobbly construction market, but a new report expects the industry to start to rebound.
Construction spending fell 12% from last year and 23% from 2008 to $23.7 billion, according to a report by the New York Building Congress, an alliance of business, government and labor groups.
The spending declines come in nearly every building category and represent a bleak spot in an otherwise recovering New York real-estate market, which has seen a rebound in sales and rentals over the past few quarters that have defied national housing trends.
While the Building Congress forecasts construction spending and growth to pick up through 2012, other industry experts aren't sure the rebound will come so quickly.
"There are literally zero square feet coming online in 2011 and 2012," says Victor Calanog, director of research at Reiss Inc., a real-estate data company. "What's coming online will have opened its doors this year with new building completely frozen."
The report is based on information from the state Department of Labor, public capital budgets and plans, as well as the consulting firm Urbanomics and data provider McGraw-Hill Construction Dodge.
The construction industry is relying on city and state government funding to pick up the slack left by private developers who helped fuel the latest building boom: Based on a review of agency budgets and projected commitments, the Building Congress said government spending is expected to increase to $15.2 billion in 2011 and $18.6 billion in 2012 from $14.6 billion this year.
The bulk of the projected jump in construction spending in 2012, though, comes from Metropolitan Transportation Authority projects that have no dedicated funding, the report said.
While the MTA's planned $3.5 billion in construction spending for 2011 is secure, the agency has yet to announce the additional funding to finance the full $7.6 billion proposed in 2012 through its current capital plan, which runs through 2014. The agency will be working with the city and state to try to fill that gap, a spokesman said.
In 2010 government construction spending represented 62% of all New York City construction dollars, marking the highest proportion of public spending since 1996.
The heavy reliance on government spending comes with its own risks, says Robert Murray, chief economist at McGraw-Hill Construction.
"The government sector is going to be critical for near-term support for the construction industry," Mr. Murray says, "but the questions is, as cities grapple with rising budgets and rein in spending, will that money be there?"
Meanwhile, the residential sector remains in a deep slump, reporting $1.6 billion in spending in 2010, down from $6.2 billion in 2008. Likewise, the commercial construction is being kept afloat by large projects such as the rebuilding of the World Trade Center, the $800 million Barclays Arena at Atlantic Yards and $850 million Madison Square Garden redevelopment.
Slowing growth are the more than 700 stalled construction sites across New York City, 46% of which are in Brooklyn, according to the Department of Buildings, which updates a database of stalled projects weekly.
Last year, the city put in place a new law that allows property owners to extend their building permits from 12 months to four years while projects remain on hold, provided they meet certain safety requirements.
"The changes are good but by itself, it isn't enough to get these projects going," says Richard Anderson, president of the Building Congress. "We're in talks with the city to come up with a more comprehensive program; otherwise it will be saddled with projects for years to come that will be unsightly, dangerous and a real headache."
Construction spending fell 12% from last year and 23% from 2008 to $23.7 billion, according to a report by the New York Building Congress, an alliance of business, government and labor groups.
The spending declines come in nearly every building category and represent a bleak spot in an otherwise recovering New York real-estate market, which has seen a rebound in sales and rentals over the past few quarters that have defied national housing trends.
While the Building Congress forecasts construction spending and growth to pick up through 2012, other industry experts aren't sure the rebound will come so quickly.
"There are literally zero square feet coming online in 2011 and 2012," says Victor Calanog, director of research at Reiss Inc., a real-estate data company. "What's coming online will have opened its doors this year with new building completely frozen."
The report is based on information from the state Department of Labor, public capital budgets and plans, as well as the consulting firm Urbanomics and data provider McGraw-Hill Construction Dodge.
The construction industry is relying on city and state government funding to pick up the slack left by private developers who helped fuel the latest building boom: Based on a review of agency budgets and projected commitments, the Building Congress said government spending is expected to increase to $15.2 billion in 2011 and $18.6 billion in 2012 from $14.6 billion this year.
The bulk of the projected jump in construction spending in 2012, though, comes from Metropolitan Transportation Authority projects that have no dedicated funding, the report said.
While the MTA's planned $3.5 billion in construction spending for 2011 is secure, the agency has yet to announce the additional funding to finance the full $7.6 billion proposed in 2012 through its current capital plan, which runs through 2014. The agency will be working with the city and state to try to fill that gap, a spokesman said.
In 2010 government construction spending represented 62% of all New York City construction dollars, marking the highest proportion of public spending since 1996.
The heavy reliance on government spending comes with its own risks, says Robert Murray, chief economist at McGraw-Hill Construction.
"The government sector is going to be critical for near-term support for the construction industry," Mr. Murray says, "but the questions is, as cities grapple with rising budgets and rein in spending, will that money be there?"
Meanwhile, the residential sector remains in a deep slump, reporting $1.6 billion in spending in 2010, down from $6.2 billion in 2008. Likewise, the commercial construction is being kept afloat by large projects such as the rebuilding of the World Trade Center, the $800 million Barclays Arena at Atlantic Yards and $850 million Madison Square Garden redevelopment.
Slowing growth are the more than 700 stalled construction sites across New York City, 46% of which are in Brooklyn, according to the Department of Buildings, which updates a database of stalled projects weekly.
Last year, the city put in place a new law that allows property owners to extend their building permits from 12 months to four years while projects remain on hold, provided they meet certain safety requirements.
"The changes are good but by itself, it isn't enough to get these projects going," says Richard Anderson, president of the Building Congress. "We're in talks with the city to come up with a more comprehensive program; otherwise it will be saddled with projects for years to come that will be unsightly, dangerous and a real headache."
by SHELLY BANJO
