Construction Spending Hits A 5-Year Low

From: Wall Street Journal.

Construction spending in New York City dropped 12% last year, falling to its lowest level since 2005, according to a new report.

Builders cut back on residential housing and office buildings even as the city’s economy slowly began adding jobs again. Part of the drop last year was due to big projects like the new Yankee Stadium and Citi Field wrapping up in 2009.

The number of construction workers also fell by 8,900 to 111,800 in 2010. It’s the fewest construction workers employed in the city since 2004.

Still, there were some bright spots for the industry. Spending held up on projects for government, universities and the health-care industry.

“There is good news—and a lot of question marks,” said Richard T. Anderson, president of trade association New York Building Congress, which prepared the report.

Overall, builders spent $23.7 billion last year, down from $27.1 billion in 2009. Spending has dropped 23% since peaking at $31.06 billion in 2007.

Spending on residential construction fell by 14% to $2.2 billion last year from $2.6 billion in 2009. “It has effectively come to a screeching halt,” Mr. Anderson said.

During the real-estate boom, the construction industry churned out 34,000 homes or apartments a year. Last year it produced only about 5,400.

Even though the jobless rate improved last year, the city ended 2010 with nearly 9% unemployment, and demand for office space remains weak. Spending on nonresidential construction fell by 10% to $8 billion from $8.8 billion.

It would have been even worse if not for a few large projects, including the World Trade Center and the new basketball arena at the Atlantic Yards in Brooklyn.

Government projects from the city and the state continued to be a reliable source of work for the construction industry. “The big question is what happens after this year,” Mr. Anderson said. State agencies like the Metropolitan Transportation Authority and the Department of Transportation still don’t have capital budgets in place for 2012, worrying many in the construction industry.

The building congress forecasts that construction spending in the city for 2011 will be flat at about $24 billion.

“So far in 2011, there seems to be an increased level of activity and optimism,” said Joseph Mizzi, president of Sciame Construction Co., which builds projects for local universities and cultural institutions.