NEW YORK, Oct 14 (Reuters) - New York City’s government, agencies, institutions and private developers are expected to spend about $93 billion through 2010 for new roads, office buildings, apartments, and schools, according to a trade group coalition report released on Tuesday.
The forecast by the New York Building Congress does not factor in the effects of the recent weeks of global financial turmoil that saw the bankruptcy of Lehman Brothers, the sale or pending sale of Bear Stearns, Wachovia WB.N, and Merrill Lynch & Co Inc MER.N and the problems at American International Group Inc (AIG.N).
The global financial crisis is expected to cost New York City thousands of high paying Wall Street jobs in addition to the jobs that support them, such as lawyers, accountants, restaurant workers.
The credit crisis has prompted Mayor Michael Bloomberg to ask the City Council to lift term limits to allow him to run for a third term and to use his financial expertise to steer the city through a potential economic storm.
“While New York City’s economy is certain to be affected by the losses in the Wall Street community, it is too soon to accurately analyze how these losses might alter the Outlook,” the report said.
Construction spending historically has lagged economic downturns because banks and other lenders and investors have already allocated much of the construction budgets. The effects of a downturn may not be felt until 2010 and beyond, the report said.
Based on the data at hand, the Building Congress expects construction spending by year-end to reach a record $33.8 billion, a 16 percent increase over 2007. The Building Congress, a coalition of businesses, labor, associations, and governmental organizations representing the design, construction, and real estate interests, sees spending tapering off to $33.4 billion in 2009 and $26.2 billion in 2010.
The city and state governments and their agencies such as the Metropolitan Transportation Authority are expected to be the prime drivers of construction through 2010.
The Building Congress estimates that overall spending on mass transit, public schools, roads, bridges, and other essential infrastructure, will reach $17.0 billion in 2008, up from $15.8 billion in 2007. Capital expenditures are expected to rise to $17.4 billion in 2009 before dropping to $14.4 billion in 2010.
Residential construction is forecast to reach 35,700 units this year with a total construction value of $6.8 billion, up from 31,902 units last year with a value of $5.3 billion.
This spike is partially attributed to a push from residential developers to get new projects started prior to July 1, 2008, when a tax incentive program was phased out. The forecast calls for 20,285 units with a value of $4.4 billion to be produced in 2009 and 18,500 units, with a value of $4.66 billion, in 2010.
Nonresidential construction, including office space, institutional development, and sports/entertainment venues, is projected to rise almost 25 percent in 2008 to $10.0 billion, and to top $11.5 billion in 2009. However, 2010 spending is expected to drop to $7.1 billion.
Construction employment, which reached at 127,000 in 2007, is expected to peak at a record 130,100 workers in 2008, hold relatively steady at 128,300 in 2009, and drop to 100,250 in 2010, the smallest work force since 1997. (Reporting by Ilaina Jonas)