NYC's hotel building process long, but could get longer
- Constructing an average New York City hotel takes about a year — or 23% — longer than other building types, according to an analysis of construction times during the last 20 years conducted by The Real Deal.
- The hotel building process first becomes bogged down during permitting, with the time from first project document submission to permit issuance taking 56% longer than it does for other project types. Once developers have a permit in hand, construction takes about 10% longer than it does for other kinds of buildings. Hotels tend to be larger than other building types, but even when taking that into consideration, hotel projects still take longer than like-size projects. Also adding to the schedule time are special building code requirements like fire alarm systems.
- New York City is now considering a new rule that could increase permit time for developers planning to build hotels in light manufacturing zones, most common in the outer boroughs like Brooklyn. Mayor Bill de Blasio's administration has argued that hotels built in industrial areas eliminate the potential for higher-paying manufacturing jobs. If the rule goes into effect, the city council would have to approve the permits for those hotels.
Hotels, like hospitals or sports venues, have special building characteristics, as well as unique equipment needs and, in the case of hotels, furniture and fixtures. Therefore, it's not surprising that there are contractors who specialize in these niches, gaining efficiencies as processes become more familiar.
The latest hotel contractor rankings from Building Design + Construction — published last month and based on 2017 revenues — have Swinerton Builders out in front, with revenue of $717 million. Suffolk Construction came in second ($662 million); AECOM third ($505 million); followed by Turner Construction ($450 million) and Brasfield & Gorrie (approximately $347 million) to round out the top five. Swinerton had a remarkable year in terms of revenues compared to the year before. Rankings from the 2016 financial year show that the first-place contractor in the segment that year, Turner Construction, brought in $521 million from hotels and that Swinerton was in second with $501 million.
Those and other firms specializing in hotel construction are likely to be busy for the foreseeable future. At the end of the second quarter, the U.S. hotel construction pipeline was up 7% year over year. Even though this growth doesn't rise to the level of 2008 highs, Lodging Econometrics predicted that the upward trend will continue, contingent on the U.S. economy remaining strong. Early planning, however, is up 25%, indicating that developers could be anxious about a potential softening of the economy and/or rising interest rates and are trying to get their projects permitted, built and to market quickly.
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