Understanding New York's Construction Cost Environment
The New York Building Congress and New York Building Foundation had commissioned a report on non-residential construction costs with an objective to quantify and clearly understand New York's unique construction cost environment. Besides, the report helped in identifying the potential ways to contain certain costs. The prime aim of the report was to:
- Examine the local, national and international factors regulating the costs of construction.
- Study the differences of construction cost between New York City and other U.S. urban centers.
- Recommend steps that City and State government, as well as the industry, can follow to contain those construction costs which are locally affected.
- Promote an environment that enables private developers, government and contractors to precisely plan long-term construction costs, which will ensure that the types of major, multi-year, city-shaping projects critical to New York City's long-term economic growth help to realize.
Weak economical conditions threaten the financial capacity for public and private sector building, though the demand for construction is high. Apart from this, the cost for construction continues to rise. In this report, general contractors in New York City reported a consistent development in several years:
- 5 to 6% increase in construction costs in 2004.
- 8 to 10% increase in 2005.
- 12% increase in 2006.
- 11% increase in 2007.
There are various factors which include national as well as global conditions that influence the rise of cost.
- Booming economies in India and China aids in the rising demand of important commodities like concrete and steel, which in return escalates their cost.
- Nationwide demand for construction materials and services is intense. Non-residential construction spending has surged by 46.5 % since 2004, and overall U.S. construction spending now exceeds $1.1 trillion annually.
- Price hike in commodities like concrete, copper and fuel, have been adversely affected by the loss of commodity production capacity in the United States.
- Inflationary pressures are also accountable for the increased rates of land, contractors, subcontractors and efficient labors, fuel prices and the cost of compliance with environmental regulations.
- Cost of bank loans for construction also have impact on price hike.
The cost of the current trends in New York City is much higher than any other U.S. city. There are various factors that support the growing gap of difference annually:
- Construction in New York City is over 60% more expensive than comparable construction in Dallas, 20% more than Los Angeles, 25% more than Seattle and nearly 50% more than Atlanta.
- Total construction costs for high rise office towers exceed $400 per square foot (psf) in New York City, compared to $180 psf in Chicago.
- Construction of public elementary school in New York City costs $512 psf, compared to $289 psf in Chicago.
- At $600 psf, the cost of hospital construction in New York City is much more than Los Angeles and San Francisco ($380-$400 psf) and Boston and Washington, D.C. ($500-$555 psf).