Local Outlook

Seeing the Glass Half Full

Industry Officials View 2004 with Cautious Optimism

By Natalie Keith

With the economy showing signs of life, local construction industry officials are viewing 2004 with cautious optimism.

Steven Spinola, president of the Real Estate Board of New York, said he takes the pulse of the office market by talking to members.

"It's been very positive in the office market," he added. "In the past few weeks I've been getting a sense from brokers of significantly increased activity."

Spinola was among panelists who participated in a forecast event hosted by New York Construction magazine. The other panelists were Alfred McNeill, former chief executive officer of the New Jersey School Construction Corp., and Anthony Woo, vice president, Battery Park City Authority. The panel was moderated by Louis Coletti, president of the Building Trades Employers Association.

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The panel was held after Robert Murray, vice president of economic affairs for McGraw-Hill Construction, made predictions for 2004.

"The worst of the commercial correction has taken place," Murray said.

For 2004, McGraw-Hill Construction is predicting a 1 percent increase, from $34.705 to $35.025 billion, in construction spending in New York, New Jersey and Connecticut. Much of this increase will stem from a rise in construction spending on income properties, such as offices, hotels, multifamily housing and stores. This sector, which is expected to rise 8 percent in 2004, is the most responsive to improved economic conditions.

After a three-year drop in employment growth, McGraw-Hill Construction is predicting job growth of 1.1 percent in New York, 1.4 percent for New Jersey and 0.7 percent in Connecticut for 2004. In New York, the financial services sector is still in the early stage of recovery and, in New Jersey, Pfizer's acquisition of Pharmacia could result in job loss.

Connecticut's employment picture is mixed, with the manufacturing sector remaining weak and the financial sector experiencing consolidation, Murray said. There also will be some relocation of jobs from New York, he added.

This is good news for tenant-driven projects such as the proposed towers to house headquarters for The New York Times and Bank of America. Large leases can also spur fit-out projects.

"Office tenants are beginning to make decisions that they're going to take space," Spinola said.

Richard Anderson, president of the New York Building Congress, said there was room for "cautious optimism" for the construction industry but "there are a host of serious questions" for 2004. Among them are whether sectors that have shown strength in recent years - such as residential, infrastructure and institutional - will continue to remain strong.

"It's too soon to tell, but so far they seem OK," he added.

Despite cuts in the New York City School Construction Authority, construction among higher-education institutions has kept institutional building strong.

The Metropolitan Transit Authority and Port Authority of New York & New Jersey have provided ample work in the infrastructure sector in the past few years, but the MTA's fiscal woes could have a dampening effect on the capital program's future.

In many ways, activity in the local construction market has mirrored national activity. As it has across the country, school construction has been strong locally, especially in New Jersey. That state passed an $8.5 billion school construction program in 2000, the largest public works project undertaken in its history.

Of that money, $6 billion was assigned to the 30 neediest school districts in the state and the remaining $2.5 billion was earmarked for other, less needy districts. In past years, much of the funding was used for renovation work, but it has been used recently to build new schools and major additions, said McNeill.

In 2003, there were 40 groundbreakings for new schools and 100 design commissions in New Jersey. In 2004, there will be 100 groundbreakings and 80 design commissions, McNeill said.

"I expect this program to be nothing but a home run for the next several years," he added.

Another bright spot in the construction industry stemming from the public sector is the work being undertaken by Battery Park City Authority in lower Manhattan, just two years after the Sept. 11 attacks. The agency recently conducted a $1.2 billion bond issue, which received AAA ratings from three different rating agencies.

While some of the capital will be used to retire debt, some will be used for security-related improvements, such as a $40 million "street furniture" program and a $10 million museum security program, Woo said.

"Because this is public land, we encourage visitors to come to Battery Park City to work and live," he added. "We can't build a fortress around it."

The agency also has plans to break ground in 2004 on three residential towers, site 2A by the Millennium Partners, site 18B by the Albanese Organization and 19B by Related Companies.

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