Dive Brief:

• Construction spending on projects across New York City will reach $83 billion by the end of 2023, a gain of about $13 billion from last year and a 10% jump from pre-pandemic levels, according to a recent report from the New York Building Congress.
• That growth stems from a surge in manufacturing, institutional, retail, hotel and office projects. Nonresidential work will account for nearly 42% of total construction spending in 2023 and will reach nearly $115 billion between 2023 and 2025. That’s 32% higher compared to the pre-pandemic years of 2017 to 2019, the report said.
• “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 Esposito, chair of the New York Building Congress and president of the Northeast and Mid-Atlantic region at Suffolk Construction. 

Dive Insight:

Nonresidential construction continues to lead construction spending in New York City, said Esposito. The federal government’s investment in infrastructure, along with resilient sectors such as healthcare, life sciences, manufacturing, data centers and transportation, will continue to create opportunities, he said.

Spending within the category will reach an estimated $34.9 billion by the end of the year, fueled by extensive investment in government buildings, manufacturing, warehouses, life science laboratories, recreational facilities, hotels, retail and education.

For example, the Department of Education and the New York City School Construction Authority announced in September a plan to allocate $19.4 billion worth of funding for school-related construction in New York City through 2024. That represents the largest funding plan for the city’s schools ever, according to the NYCSCA.

Government spending in New York City will also increase in the short term, rising to $22 billion by the end of 2023. After that jump, however, NYBC projects a decline to $21 billion in 2024 and $13.4 billion by 2025, largely due to uncertainty about future multi-year capital plans.

But despite the strength in nonresidential construction spending, residential spending, on the other hand, experienced a sharp decline in new housing construction permitting in 2023, according to the report. NYBC projects the number of new units in 2023 to drop from 30,000 units to 11,300 units.

Nevertheless, NYBC anticipates the federal funding packages, such as the Infrastructure Investment and Jobs Act and CHIPS Act to eventually bolster spending on New York City public projects. So far, only $11.7 billion of the $1.2 trillion IIJA has been awarded to New York, according to the report.

Due to that, government spending on infrastructure development will likely dominate the construction market. The city has already identified over $14 billion in state-of-good-repair needs, such as the extension of the Second Avenue Subway and phase one of the Gateway Program.