Thanks to a development boom, construction work is as routine a sight in New York as pigeons, traffic and tourists in Times Square.
And, while the real estate sales market has cooled, construction hasn’t slowed, and every street and avenue remains fair game for builders. It’s fair to make the assumption that as residential high-rises lose their boom-time luster, so too will developers lose their appetite for new construction — but that’s not the case. For New York’s construction industry, the boom has just begun, and for developers, that’s not necessarily good news.
“I think you’d be hard-pressed to find a time when more projects have been seeking to be undertaken at the same time in the city’s history,” said Chris Ward, managing director of the General Contractors Association of New York. “Between all the public and private projects, I think you could be talking $30 billion to $40 billion in work over the next five to seven years.”
While most involved in New York construction love hearing numbers like these, there’s a concern among many well-placed individuals in the industry that, this time around, demand for construction work at all levels will outstrip regional supply, leading to a shortage of qualified contractors, subcontractors and skilled laborers. Consequentially, there will be delays in project schedules and an increase in building costs.
“A concern that both public and private developers have been expressing is that we’re still at the beginning of a major expansion in this city,” said Lou Coletti, president of the Building Trades Employers’ Association, whose membership includes major construction management firms in the tri-state area. “The market [for qualified contractors] is already tight. As the work piles up, who is going to do it?”
Blockbuster projects abound
To understand the enormity of the challenge facing New York’s construction industry in the coming years, one need only to look at projects in progress or planned in Manhattan and the boroughs. Currently, in addition to the countless number of residential high-rise projects under way, work continues on the 52-story New York Times Building near Times Square and the 54-story Bank of America Tower by Bryant Park.
Downtown, the 43-story Goldman Sachs Tower is rising not far from the World Trade Center site, where the rebuilding effort will single-handedly consume a significant percentage of the New York region’s construction capabilities for at least the next seven years. In the boroughs, there is Forest City Ratner’s proposed 8.7-million-square-foot development of Atlantic Yards in Brooklyn, and stadium projects planned or under construction for the Yankees, Mets, Nets, Jets, Giants, Jersey Devils and Red Bulls.
Even if private sector demand were to level off, labor and materials-intensive public projects such as the Croton Water Treatment Plant, East Side access for the Long Island Railroad, development of Hudson Yards, the No. 7 subway line extension and the planned construction of the Second Avenue subway line will keep the market tight.
“There’s clearly increased activity in the market right now, I’d say primarily due to the residential [projects], but what’s really going to test the market are these mega-projects coming down the line,” said Steve Pressler, executive vice president/area general manager for construction management firm Skanska USA Building.
“It will be a question of timing. Ideally, residential building will start to ease off and these big projects will kind of get delayed and spaced out. But if you have residential demand continue and all these projects clump up, the situation will be very difficult.”
Labor sources stretched
Pressler said it is already particularly difficult to book contractors for site-preparation work, foundation work and earthmoving. He credited this scarcity mostly to below-grade work taking place on a variety of projects at the World Trade Center site and noted that the shortage of qualified contractors could be made worse when other major projects break ground.
For their part, contractors say they’re doing all they can.
“We’re at capacity,” said Edward Cruz, president of Holmdel, N.J.-based heavy construction firm E.E. Cruz & Company. “Right now, we’re just trying to be as efficient as possible and get our jobs done.”
Cruz’s mid-sized firm began work in August on a $17-million contract to build the foundations and footings for the World Trade Center Memorial. He said he expects the volume of his firm’s work to increase 10 to 20 percent over the next year, pushing his veteran employees to the limit. Cruz said he plans to take on some extra workers, but said it will be difficult because qualified workers are in short supply.
“Everyone’s out working. The hiring halls are pretty much empty. They don’t have any more people,” Cruz said. “We managed to hold on to our qualified people when the market was slow, so we’ll do all right. If you’re [a firm] trying to fill big holes, I don’t know if you’ll get guys who know what they’re doing.”
A tough town for outsiders
Outside sources of manpower are hard to come by thanks to the complexity of the New York market. It would make sense that if overbooked New York contractors are unable to grow at sufficient speed to meet the city’s construction needs, the gap could be plugged by farming out work to contractors and subcontractors from other major U.S. markets.
Maybe not.
Ward at the GCA said it’s not that easy. He said it can be difficult for contractors from other markets to perform effectively in the congested and code-heavy world of New York construction, the Major League of building. Crews in the city typically add three floors a week to a building, compared to two elsewhere.
“If the market requires firms to come in from outside [the New York area], the complexities of building [here] can hurt them,” Ward said. “They need to know the logistics and the labor situation and the building code. A qualified, expert team from elsewhere will not necessarily be qualified or expert here.”
Coletti at the BTEA agreed.
“The New York market is so unique for so many reasons,” he said. “There are rules and regulations here that you don’t have anywhere else, and you need a higher-skilled workforce than you need anywhere else. You’re just not going to roll into town with your own workforce from out of town. It just wouldn’t work. All of that affects the bottom line [of outside firms] and chases many away. You have to do your homework and you have to jump through the hoops.”
An out-of-stater’s struggle
Over the last several months, Tim Smith has become intimately familiar with these hoops. Smith is heading up the business development effort of Brandenburg Demolition, a Chicago-based firm with a Mid-Atlantic office located in Bethlehem, Pa.
Drawn by the hot market, Brandenburg is looking to make its debut in the city. Smith has been busy pounding the pavement all around town, setting up meetings with the heads of all the city’s major construction management firms — Tishman Speyer, Bovis Lend Lease, Turner, Plaza, Skanska USA and others — and the heads of many of the city’s trade associations, including the BTEA and the New York Building Congress.
“I don’t build, I demolish,” Smith said. “It’s been a matter in my case of understanding who builds things here and who builds in places where there are pre-existing structures.”
Setting up shop in New York doesn’t only involve making connections; there are also the regulations to contend with. One hurdle unique to New York, Smith said, was the city’s VENDEX approval process, run by the city’s Office of the Comptroller. Designed to ensure that firms with which the city does business are financially sound and conduct their business in a moral manner, VENDEX approval requires completion of a lengthy questionnaire that must be notarized, signed and sent in to the city. Approval can take months and contractors need VENDEX approval to bid on any city contracts, and many private ones.
Smith said that, though setting up in New York has been “challenging in some ways,” construction managers have indicated Brandenburg’s timing is right, and that work is available.
“It’s no secret that the construction managers aren’t getting the responsiveness from the New York market that they used to because everyone’s busy,” Smith said. “I’ve been told the timing of our push is very good.”
It’s clear the building boom will test the New York construction community, and the industry needs a solution to its multiple shortages before they stunt further growth. At this point, Ward said, at least everyone knows what to expect.
“Everyone’s talking about it. Everybody realizes the challenges,” he said. “Communication and staying efficient will be key.”