Total existing-home sales—completed transactions that include single-family homes, townhomes, condominiums and co-ops—rose 3.1% from December to a seasonally adjusted annual rate of 4.00 million in January.
Report: NYC Construction Spending to Reach $83 Billion in 2023
NEW YORK—The New York Building Congress released its “2023-2025 New York City Construction Outlook Report” on Oct. 18 where it projects that total construction spending in New York City will reach $83 billion in 2023, up $13 billion from last year, adjusting for inflation. The updated spending figure is projected to reach $261 billion over a three-year period and is about 18% higher than pre-pandemic spending.
The report stated, “Spending in inflation-adjusted dollars is expected to reach $261 billion ($285 billion, in nominal dollars) over a three-year period, growing to $88 billion in 2024 and then to $89 billion in 2025. Compared to the pre-pandemic, three-year period from 2017 to 2019, this reflects an inflation-adjusted increase of $40 billion. Although high interest rates on construction starts and property mortgages are expected to somewhat depress property values through reduced demand, escalating material and labor costs, as well as ongoing supply chain issues, have significantly contributed to increased building costs and are not likely to deflate with more development.”
“Construction spending has always served as an indicator of a region’s economic health, and we’re proud to report continued growth and resilience, high levels of employment and billions of dollars in economic outputs across New York City,” said Carlo A. Scissura, President and CEO of the NY Building Congress.
He added, “Notably, residential construction has declined citywide due to the expiration of 421-a, high interest rates and outdated bureaucratic red tape. The Building Congress calls for policies to support housing production at all levels of affordability to combat our housing shortage and ensure New York is a functional and affordable place for all New Yorkers.”
Non-residential development continues to lead construction spending, totaling $34.9 billion in 2023. In 2023, 6.65 million square feet of new office space will be completed. New office construction is expected to decline by a million square feet each year through 2025. Non-residential construction will likely be driven by manufacturing and educational projects and laboratories in New York City over the next several years, the report stated.
Over the next few years, government spending on infrastructure development is projected to dominate the market. In 2023, government construction spending will reach $22 billion, up from $20 billion in 2022. While funding decisions are still being made at the federal level for competitive grants from the Infrastructure Investment and Jobs Act (IIJA), formula funding is expected to reach New York City much more rapidly, according to the report.
The Metropolitan Transportation Authority is expected to invest $30 billion within the five boroughs over the next three years, a 47% increase over pre-pandemic total spending between 2017 and 2019. The Port Authority of New York and New Jersey is expected to invest $1.8 billion in New York City capital projects in 2023, slightly down from almost $2 billion in 2022. An additional $1.6 billion in public works spending will be undertaken by various state and federal agencies in 2023, the New York Building Congress stated.
One of the few negatives for the construction industry in New York City was the impact of the 421a tax incentive’s expiration on new multifamily building projects. Residential development and rehabilitation accounts for 32% of construction spending in 2023, down from 37% in the previous year. Due to the expiration of 421-a, combined with high interest rates and significant bureaucratic hurdles, property owners and investors are expected to prioritize spending on maintaining, renovating, and upgrading existing residential properties over building new ones over the next few years, according to the report.
Another bright spot for the city’s construction sector is the fact that its workforce is almost back to pre-pandemic levels. The report noted that construction employment in 2023 is behind its pre-pandemic levels by 5%. However, the building industry is set to grow by almost 19,000 new jobs within three years. The Building Congress anticipates employment in the construction of buildings, heavy and civil engineering, and specialty trades to total 153,000 jobs in 2023, 160,000 in 2024 and 162,000 in 2025, when the industry is expected to finally bounce back to pre-pandemic employment levels.
In response to the NY Building Congress’ positive forecast, two prominent construction industry executives also pointed out the industry’s resilience during the COVID pandemic and its promising future.
“While the commercial real estate development and construction industries in New York City are facing significant headwinds due to the economic climate, we remain bullish about the long-term growth and success of our industry,” said Ralph J. Esposito, Chair of the New York Building Congress and President of the Northeast and Mid-Atlantic Region at Suffolk. “The federal government’s heavy investment in infrastructure, along with resilient sectors such as healthcare, life sciences, manufacturing, data centers and transportation, will continue to create opportunities to develop and build incredible projects that will transform our city skyline and improve the quality of life for our citizens.”
Gary LaBarbera, President of the Building and Construction Trades Council of Greater New York, added, “If New York is to maintain its economic revival and set a solid foundation for our future generations, it is critical that we continue to fund development and construction projects that generate thousands of good paying, family sustaining career opportunities for working class New Yorkers. The trends shown in this year’s Construction Outlook Report are certainly promising, but continued investment, paired with policy efforts that address shortcomings in areas such as housing, are necessary so that we may meaningfully uplift our communities and provide more of our tradesmen and tradeswomen the opportunity to pursue an honorable, fulfilling, and secure path to the middle class.”