- Construction spending in New York City will reach an all-time high of $86 billion this year, up $38 billion from 2021, according to a new report from the New York Building Congress.
- The report finds that despite numerous obstacles from the pandemic and economic uncertainty, construction spending and infrastructure investment in New York City remain positive.
- However, a lack of replacement for the expired 421-a property tax exemption program for multifamily builders could dampen this outlook, according to the report. NYBC warns of an exacerbated housing shortage without a suitable program to incentivize residential construction.
Nonresidential growth in New York City over the next three years will be driven by large investments in healthcare facilities and new offices, according to the report. Office valuations in New York City are forecasted to decline by as much as 39% by 2029, but that downward trend largely affects only lower quality, less expensive office buildings.
On the multifamily side, NYBC forecasts about 71.5 million square feet of residential floor space to be built in 2022, and estimates over 30,000 units of housing will be built annually over the next three years.
The projected new square footage of residential construction built over the next two years is twice as high as projected nonresidential construction. However, NYBC warns that without a replacement for the 421-a program, the number of residential projects will likely decrease. The 421-a property tax exemption is for real estate developers building new multifamily buildings in the city.
“We need to find a suitable replacement for the expired 421-a program, streamline the land use review process, and increase as-of-right zoning capacity,” said Carlo Scissura, president and CEO of the NYBC, in the report. “Not only does the city’s economic recovery depend on it, our current housing crisis demands it.”
New York City’s population has increased by more than 625,000 in the past decade, but has added only 206,000 units, said Scissura. NYBC projects a gap of over 560,000 housing units by 2030, according to the report.
The report predicts about 105.1 million gross square feet built in 2022, higher than pre-COVID levels. NYBC expects that to increase further over the next two years, to 110.8 million square feet in 2023 and 118.2 million square feet in 2024.
Labor challenges ahead?
That positive construction activity also depends on a healthy labor market.
Researchers and other experts expect millions of new construction jobs in coming months across the U.S. due to the passage of the Infrastructure Investment and Jobs Act, CHIPS Act and the Inflation Reduction Act. Yet questions remain on where these workers will come from.
In New York City, the NYBC expects the construction industry to add tens of thousands of new jobs within three years. That still trails the pre-COVID level of 161,183 jobs in 2019, according to the report.
The report predicts employment in the construction of buildings, heavy and civil engineering and specialty trades to total 139,000 jobs in 2022, 143,000 jobs in 2023 and 142,500 jobs in 2024.