Dive Brief:

• Overall construction spending in New York City, according to the New York Building Congress, will drop from $60.6 billion in 2019 to $55.5 billion in 2020, a decline driven by the COVID-19 pandemic and ensuing recession. Total construction spending is expected to reach $168.5 billion from 2020 through 2022, the group reported in its 2020-2022 New York City Construction Outlook.
• The NYBC predicted that nonresidential construction spending — i.e. office space, institutional projects, sports and entertainment facilities and hotels — will dip to $16.6 billion in 2020 from $21.2 billion in 2019. Office construction, which usually makes up 50% of nonresidential spending, is expected to decrease in 2022 after a 2021 increase. As a counter to the decrease in core and shell construction, there should be an increase in interior renovation spending.  
• Total construction employment in New York City is also expected to take a hit for the period from 2020 through 2022, with a 14% decrease when compared to the three-year period from 2017 through 2019. The NYBC forecasted 128,200 jobs in 2020, 136,650 in 2021 and 140,200 in 2022. 

Dive Insight:

On the uptick between 2019 and 2020, as well as predicted for 2020 through 2022, will be spending for Port Authority of New York and New Jersey projects, as well as for the Metropolitan Transportation Authority's capital program. The spending estimates for these agencies are dependent on federal funding. When combining the expected outlay for these two agencies with other public projects, government spending will account for 40% of total construction spending in the city, up from 31% for the period from 2017 through 2019.

The MTA prioritized some projects in order to take advantage of the ridership lull during the pandemic lockdown, but some big undertakings that are part of the authority's $51.5 billion 2020-2024 capital program have been delayed.

This could give the MTA additional time to come up with new procedures for evaluating contractor performance, a recommendation made by Carolyn Pokorny, the authority's inspector general. In her latest report, Pokorny said that only 1% of MTA contractors were rated as unsatisfactory spite evidence to the contrary. The MTA agreed that it needs to beef up its evaluation process. 

Although New York City construction activity has resumed since the coronavirus outbreak shut down many sites this spring, the NYBC said 72% of its members expect to remain slow for the rest of the year. Looking to 2021 and 2022, the majority of the organization's members had low to very-low confidence that the city construction environment would offer adequate business opportunities. 

Despite the general consensus that new construction will be negatively impacted for the next few years, major developers still find New York City an attractive market. Earlier this month, Australia-based Lendlease announced that it would build a $718 million, 800-unit waterfront apartment development in Brooklyn. The project, which is backed by Australian pension fund Super Aware, will include a waterfront esplanade and 240 affordable units.