In a Webcast interview last month, The Real Deal’s Jen Benepe spoke to two construction industry leaders to find out how the economic slowdown will affect construction and construction jobs in New York City in the next two years. An October report from the New York Building Congress predicts that 28,000 jobs in the construction industry will be lost by 2010. The number of projects is also likely to shrink.
Log on to www.therealdeal.com to see the full interviews and access the archives. Every week, The Real Deal posts a new edition of the Webcast, which features exclusive interviews with industry insiders.
First, The Real Deal spoke to Richard Anderson, president of the New York Building Congress.
TRD: So your report that just came out said that things are going to be fairly good in construction through 2009 but maybe fall off in 2010. Why the rosy picture for 2009?
Richard Anderson: It turns out that 2008 will be the best year for the New York City construction industry. That kind of activity cannot stop abruptly, even when the economy turns, so 2009, barring a real [further] slowdown of the credit markets, will be fairly OK. It’ll be less than 2008, but 2010 is when things start to drop off fairly significantly.
TRD: Now, your projections say that we will probably lose about 28,000 construction jobs by 2010. Will we see some of those jobs lost a little bit sooner, and when will that start?
RA: That will probably start next year. The peak is 130,000 jobs this year. If things level off softly, as we hope they would, then we’d only lose a few thousand jobs. But 2010’s the question mark. And it could be even worse than our forecast if the public infrastructure programs do not get financing going forward — the city’s capital budget and the Metropolitan Transportation Authority in particular.
TRD: Also in your report, you say that we could have the smallest workforce in construction since 1997. Which sector would you say is most affected going forward?
RA: The residential sector will be hurt the most. And this is because housing units will fall [by] half in just a two-year period. That’s a substantial drop. The commercial and public sectors are not anywhere near as strongly affected by this downturn.
TRD: In your report, would you say that this is one of the most drastic falloffs in dollar amounts for the industry?
RA: It’s a substantial decrease in 2010. But compared with previous economic downturns in the late ’80s, early ’90s, and certainly compared with the early 1970s, this is not that drastic.
Next, The Real Deal spoke to Michele Medaglia, president of ACC Construction.
TRD: No doubt you’ve read the New York Building Congress report. They’ve projected something on the order of 30,000 jobs to be lost by 2010. Do you agree with that report?
Michele Medaglia: Yes, I do. I do agree with that report.
TRD: Why?
MM: Because there’s definite fear, right now, that exists in the market, and people are waiting to see what happens. You know, right now it’s like a rollercoaster, and everyone’s kind of frozen and saying, OK, I’m not making a move until this kind of settles down and we all see where we are.
TRD: OK, now, what about your firm? Have you decided that you are going to not hire as many people in 2009?
MM: Right now, we are in a very good position where I have a significant amount of work to carry me through to at least the first quarter of 2009. So right now, we’re good with the staff that we have, and we actually are hiring right now. It’s not, you know, a ton of people, but it’s definitely a few people, especially in the field, in our operations department, because we do have the work booked.
TRD: Given that you’re so good in high-end retail, what’s going to happen with that sector to your company?
MM: Well, the number of projects in high-end retail are obviously down, and they’re going to be. But [going forward] there are other industries that are going to be busy. For instance, colleges, universities, health care — and that’s what we’ve been marketing since the beginning of this year.
TRD: Michele, we already know this is a very competitive industry. What’s going to happen now?
MM: It’s going to get even more competitive. It’s going to get really, really competitive. If the number of projects — and we see this happening — decreases, all of us who are in this industry, and there are many of us, are going to fight like hell for every single project.