NEW YORK: An Introduction to New York

2018 Construction Outlook 

U.S. builders exited 2017 on a high note, with the Commerce Department reporting a 2.6% advance over the prior 12 months – the fifth monthly gain in a row and a record high annual rate of $1.25 trillion. As 2018 advances, construction across America is expected to continue its strong run. Confidence remains high, and economic indicators project that the industry will have another robust year.

Three-quarters of the contractors surveyed by Associated General Contractors of America said they plan to increase payrolls in 2018. Their optimism for all types of construction has hit a record high, with the most optimism shown for construction in the office market. Transportation, retail, warehouse and lodging were also strong in the survey. The AIA’s Consensus Construction Forecast Panel predicts that commercial construction spending should expect about a 4.0% increase and institutional construction should see about a 5.8% increase next year. The Architecture Billings Index (ABI) saw its highest January score since 2007.

Newly enacted federal tax reforms are expected to promote favorable business conditions that would encourage further investment in commercial construction. Rebuilding efforts in areas greatly affected by the natural disasters of 2017 – Hurricanes Irma and Maria and the California wildfires – should have a positive impact on the construction industry in the years to come.

In New York City a record breaking building streak is expected to continue, according to the New York City Building Congress, which anticipates $52.5 billion in construction spending in 2018, followed by $50.1 billion in 2019. This follows on the heels of the city’s second and most robust building boom of the 21st century in 2017, which was only exceeded by 2016’s levels, expected to return in 2018. To put 2016 into perspective, the $52.2 billion in construction spending was nearly 24 percent greater than the next best year (2007), even after adjusting for inflation. And it exceeded the Building Congress’ prediction of $43.1 billion from the previous year’s report.

Non-residential construction spending, which includes office space, institutional development, government buildings, sports/entertainment venues, and hotels, is expected to reach $22.1 billion in 2018. The primary driver is office construction, which is at its highest levels in three decades with an estimated 15 million sq ft of office space to be completed in Manhattan alone from 2017 to 2019, and an additional 2 million sq ft of office space anticipated for completion in the boroughs of Brooklyn and Queens during this time.

New York City’s public and private institutions continue to be major users of building industry labor and services. After office construction, the educational sector, led by the public school system and the city’s colleges and universities, is expected to be the second biggest source of construction spending. The healthcare industry is another major institutional builder with continuing growth.

Residential spending in New York City, which includes spending on new construction as well as alterations and renovations to existing buildings, is projected to reach $11.6 billion in 2018, with 24,000 new housing units to be built in 2018.

Government spending on public works is expected to amount to $18.8 billion in 2018 due to local municipal projects and Port Authority of New York and New Jersey initiatives, including the greatly anticipated Gateway project, Metropolitan Transportation Authority initiatives and other essential infrastructure improvements. In its current 10-year capital program, New York City invests heavily in its built environment throughout the five boroughs - its public schools, housing, resiliency efforts, transportation, parks, roads, bridges and water mains.

While skilled labor may be in short supply in other parts of the country, construction employment in New York City is expected to rise for the sixth consecutive year and surpass 140,000 jobs for the second year in a row, with forecasts predicting a climb to 151,200 jobs in 2018. Later this year, the New York City Department of Buildings will finalize a plan to ensure that construction workers working on sites in the five boroughs have equal access to the required training. They will also begin enforcing a rule requiring all workers in the city to have a card proving they completed a basic 10-hour safety course based on federal guidelines. It is unclear, what impact, if any, this will have on labor flow as these regulations take effect.

Proposed legislation for 2018 targets costs. New York has the nation's highest liability standard for property owners, a fact that several reports and groups have cited as something that drives up construction costs and causes delays. A federal bill targets the state’s 1885 Scaffold Act, which imposes absolute liability, the highest in the nation, on a property owner or construction employer in any case of a work-related fall. As reported by Governing, the proposed law would require New York's federally funded projects to adhere to the same liability standards found in all other states. If approved, the bill could have a dramatic impact on infrastructure as New York received nearly $3.3 billion in federal transportation grants in 2016 alone, according to the state comptroller's office. On the state level, lawmakers in the New York State Assembly are behind a bill that would allow cities to use the design-build procurement method on municipal projects, which is considered a way to reduce costs. In 2018, the legislature approved a measure giving the New York City Housing Authority this ability.

While near-term, growth is forecast for New York City, as well as the rest of the nation, there are concerns about the impact of the continuing construction labor shortage, the steel and aluminum tariffs and rising prices of materials and commodities. But even if growth in other regions slows, New York is a magnet for corporations and professionals, and the demand for office, institutional and living spaces will remain steady and strong. Efforts to prioritize infrastructure investment, expand vital industry sectors and eliminate New York’s dubious honor as the nation’s highest cost city for construction by focusing on best practices as a means of lowering costs and speeding up project delivery will ensure that it remains a great place to live, work and build.