New York City construction costs are on the rise, outpacing increases for the rest of the US, according to a New York Building Congress report.
Construction costs for New York increased by nearly 5 percent in 2013, then an additional 5 percent in 2014. In comparison, US construction costs inched up by 2.5 percent in 2013 and 3 percent in 2014.
The data in the report represents the “hard costs” of construction, while excluding the price of land (also skyrocketing) and “soft costs” such as architectural, engineering and legal fees.
The Building Congress averaged several cost indices produced by ENR, Rider Levett Bucknall (RLB), RS Means, Turner and BLS, which all measure the percentage change in construction costs from one year to the next. The organization also conducted interviews with employees of some of the city’s largest construction firms.
The recent fall in oil prices could lower expenses related to delivery and petroleum-based products. However, “the construction company representatives expressed concern that costs could rise further given that certain essential trades, such as curtain wall and cast-in-place concrete, are reportedly running out of capacity,” the report states.
During the hot building years of 2006 and 2007, construction costs leaped 6 percent nationally, while New York posted year-over-year increases of 12 percent in 2006 and 11 percent in 2007. After the financial crisis, both the US and Gotham experienced a decline in costs in 2009, with a nominal gain in 2010. Between 2010 and 2012, New York construction expenses inched up between 2 and 3.25 percent annually, before increasing more significantly in 2013.
Recently, the materials with the sharpest price hikes have been gypsum products, lumber and plywood, insulation materials, PVC pipe products and steel shapes.
At a brisk 5 percent annual rate, the current level of construction cost inflation “is cause for concern,” New York Building Congress President Richard Anderson said in a statement. “The design, construction, and real estate industry, in partnership with government, must look for ways to reduce the cost of construction through innovations in the way we build as well as by eliminating burdensome regulations and costly red tape,” he added.
Construction is most expensive for hospitals, at $800 to $950 per square foot, according to the report. Five-star hotels are the next priciest to build, at $700 to $800 per square foot, followed by university buildings ($600 to $850), secondary schools ($500 to $600) and speculative office space ($425 to $500).