Construction has reached a new record in spending, according to a recently released report by the New York Building Congress. Total expenditures for 2016 is an estimated $42.4 billion—a historical first for the city as spending has officially crossed the $40 billion threshold. As a result, the construction industry has generated $66.3 billion by the end of 2016.
The report goes further into explaining the details of 2016’s construction expenditures. $17.1 billion dollars were channeled to non-residential construction, which includes offices, institutional projects and hotels. This represents the majority, and is followed by government construction ($12.7 billion) and residential ($12.6 billion).
“The bottom line is, the construction industry is on fire,” said Carlo Scissura, president of the Building Congress, in an interview with The Real Deal. It has been projected that up to 20 million square feet of new space will be added. The currently developing Hudson Yards makes up a huge part of this.
However, Richard Anderson, Building Congress President, has expressed his concerns with regards to the Residential Properties segment in construction.
“The big question is whether this pace can be sustained once all the projects currently in the pipeline have been completed,” he said. He also cited the city’s rezoning efforts and its housing affordability issue as some key industry concerns.
While construction is currently booming, its future affordability has also been an area of concern for some analysts. Another recent report stated that New York is now one of the 24 cities with an “overstretched” availability of construction due to extremely high costs. Currently, New York has officially surpassed Zurich as the most expensive place for construction with an average cost of $354 per square foot (compared to Zurich where construction is $328 per square foot). Meanwhile, construction laborers are paid an hourly wage of nearly $100 an hour.
The costs of construction will continue to increase as the years continue to pass by. Analysts have already predicted that the price will increase by an additional 3.5% by the end of this year. While this is a worry, real estate players can be pleased by the new properties that will be released in the market as well as the impact of new developments in the city’s—and even the country’s—economic growth.