The real estate industry in New York City has been reeling from the most recent economic downturn, but is preparing to take a step forward with a 10 percent increase in construction spending, according to a report from The New York Building Congress (NYBC). The organization asserts a $31.5 billion price tag on this year's construction, as opposed to the $28.5 billion of last year.
This renewed effort should stimulate the industry, says NYBC president Richard Anderson. The new projects will create jobs and opportunities – Anderson expects construction employment to increase by 1.5 percent to 122,700 this year, improved from the 120,900 mark of 2013. Additionally, it will provide business for distributors of fasteners, electrical supplies, and construction tools.
Residential sector spurs growth
The division of construction that will see the largest spending increase by far is residential, which is forecast to eclipse its 2013 budget by 50 percent – rising from $6.8 billion to $10.2 billion. The proposed spending will result in about 20,000 housing units, down from the 30,000 yearly average of the previous real estate cycle. That is because the focus this year will be on luxury residences, which are in high demand in Manhattan, Brooklyn and Queens.
This won't necessarily address New York City's pedestrian residential construction pace, which the Wall Street Journal cites as falling behind major cities like San Francisco, Seattle, Washington, D.C., and Boston.
"A tale of two cities"
This was the platform upon which Bill de Blasio ran during the New York mayoral race, stressing the elimination of inequality within the city, and it helped win him the election. As part of his great expectations, de Blasio plans to "create or preserve 200,000 units of affordable housing over the next decade," says Anderson, who admits that will be a difficult goal to achieve.
De Blasio's plan to tackle affordable housing requires developers to build taller buildings as zoning regulations allow, but that presumes the contractors will be able to turn the necessary profits to offset the cost of the reasonably-priced units. It is a nuanced issue that will require a thorough approach.
While the NYBC's current focus on luxury residences certainly does nothing to address the needs of those with low incomes, it could still provide a necessary spark for the real estate market in general. Residential construction witnessed major growth in 2013, but remained well below pre-recession levels. However, the industry may be able to close the gap with a similar burst in 2014.