Construction Braces For Bitter, Brutal Winter As Coronavirus Cases Surge
As the coronavirus infection rate inches upward and the temperatures begin to dip, New York City construction is preparing for another pandemic winter.
In addition to the usual challenges that the New York City construction industry faces during the frigid cold months, this year will be fraught with continuing delays due to a sustained decrease in workforce, the lingering effects of the spring’s shutdown and the ramification of supply chain slowdowns this year.
On top of that, while there has been no indication of a second shutdown yet, the potential for a second wave of the coronavirus and what it will mean for construction looms ominously over the industry.
Already, sector leaders have been hosting sector-wide Zoom calls and increasing preventive measures, hoping to proactively quell any additional pandemic-related holdups while contractors and subcontractors are setting their sights on shutdown-proof projects.
“Obviously, all preparation is in place to avoid a second shutdown, so hopefully that won’t happen,” Building and Construction Trades Council of Greater New York President Gary LaBarbera said in an interview with Bisnow last week. “We’re redoubling down on all mitigation.”
Gov. Andrew Cuomo announced the first statewide coronavirus restrictions since May on Nov. 12 as infection rates statewide and in the city trend upward with the rest of the country. The next day, the average infection rate over a seven-day period across the five boroughs was 2.9%, the highest in a one-week period since May.
The number ticked down for a few days last week, but rose again, reaching 3% Wednesday and prompting Mayor Bill de Blasio to shut down schools that same day.
Construction productivity has already taken a hit since construction sites reopened in late spring. During the last shutdown, Cuomo deemed all construction essential at first, but after reports of safety violations on sites, he reversed course and said most construction sites would need to shut down.
New nonresidential construction project starts have been on a steady decline in the New York area since construction was allowed to resume, according to construction data company Dodge Data & Analytics.
In July, construction starts declined 25% year-over-year, from $2.1B in 2019 to nearly $1.6B. Starts in August dropped to $1.1B, down from nearly $2.6B in 2019. In September, the year-over-year decline reached 72%, with only $695M in commercial construction starts, down from $2.4B in 2019.
Residential construction, which has outperformed commercial construction, is still down by 24% year-to-date in the Greater New York area, which includes Long Island, the northern suburbs and northern New Jersey.
Overall construction starts are down 25% so far in 2020, down more than $8B from $33.2B in 2019 to less than $24.9B this year.
Over 38,000 construction jobs statewide were lost year-over-year in September, data from the New York State Department of Labor shows. More than 19,000 of those jobs lost were in New York City.
Looking forward, economic data from this year suggests a slow road to recovery in many parts of the construction industry, Dodge’s 2021 outlook, released last week, shows.
“Construction markets have been deeply scarred and will take considerable time to fully recover,” Dodge Data & Analytics Chief Economist Richard Branch said in a statement. “Uncertainty surrounding the next wave of COVID-19 infections in the fall and winter and delayed fiscal stimulus will lead to a slow and jagged recovery in 2021.”
Some major project starts and construction loans that were recently announced suggest that there is appetite, however dampened, for new building projects that will come to market over the next five years.
Earlier this week, SL Green scored a $1.25B loan to start construction on its 1.4M SF office and retail building, One Madison Avenue, which is set to be finished by 2024. Lendlease secured a $250M construction loan in June for its 42-story condominium project in Morningside Heights, set to be completed by 2023.
Winter Is Coming
Meanwhile, the industry is doing all it can to prepare for the colder months.
LaBarbera said he has been on industry-wide Zoom meetings in an attempt to redouble its efforts to keep sites safe and remain vigilant amid “pandemic fatigue," to ensure that all construction sites remain open throughout the winter.
Conversations like these that have kept the industry safe so far, he said, as many of the industry-wide recommendations and guidelines established to keep workers safe at the onset of the pandemic have been adopted by the city and state as official protocol.
“For affordable housing, it’s a double-whammy financially,” he said. “Not only do you have delays, you also have low-income housing tax credits that have very strict delivery timelines and financial penalties, making delays doubly hard.”
On average, his affordable projects across the city are seeing a two- to four-month delay due to holdups in the supply chain last winter and spring, along with a decreased workforce. Penalties for these delays are in hundreds of thousands, and sometimes even millions of dollars, he said.
While his affordable projects will likely carry their essential status in the event of a shutdown, if cases reach a critical mass, it may be too dangerous for laborers to come to work.
“We do want to protect the safety of our workers first and foremost,” he said.
Cold weather does pose some new challenges to mitigating the spread of infection, Turner Construction spokesperson Chris McFadden said.
For one, there will have to be fewer people at heating stations at one time to comply with state social distancing laws. Hand-washing stations with soap and water will be harder to keep running once temperatures drop below freezing.
“We’ve implemented all of these new protocols since the pandemic started, and all of these protocols need to remain in the cold, too,” McFadden said.
As of right now, there seems to be no talk of a shutdown at the city level, said Herrick Feinstein partner Brendan Schmitt, who represents construction firms working on a variety of projects. Schmitt doesn't think that there will be a shutdown and said in conversations he has had, that isn't a widespread fear.
“Construction has been one of the bright spots to normalization, and frankly the success of the industry would make me hopeful that there wouldn’t be a second shutdown,” he said.
Some contractors, subcontractors and project managers are nevertheless preparing for the possibility of being forced to stop working.
HAP Construction CEO Eran Polack said while his projects, including the two-building, 20-story mixed-use residential development at 215 and 225 West 28th St. in Chelsea and 4452 Broadway in Hudson Heights, are moving along, he believes having to halt the construction process is inevitable.
“I am pretty much sure there will be a second shutdown,” he said. “We will push forward on our affordable projects if that is the case, and we will take the shutdown to create a new schedule to get projects done when restrictions are lifted.”
Polack said with fewer laborers allowed on-site at a time, he is deploying more workers on more shifts as he adjusts his pre-pandemic work schedule to meet coronavirus social distancing guidelines. He said costs have dropped in recent months, as well.
“The price of construction is going down, subcontractors want to get jobs that will keep them busy, so they’re more lenient,” he said.
“There’s a lot of fear and uncertainty about what a second shutdown would mean,” he said.
Michael Filler is a senior project manager at Brooklyn-based Tribesman Group Inc., a midsized carpentry and general contractor outfit founded in 2015. Tribesman employs a total of 30 people, 22 of whom are carpenters.
“We’ve been trying to diversify the types of jobs we’d typically bid on in the case of another shutdown," Filler said.
The company usually bids on mid-rise to high-rise commercial projects. Currently, it is working on several multifamily projects, including a 21-story, 15-unit apartment building at 1230 Madison Ave. on Manhattan’s Upper East Side, as well as a 21-story apartment building at 214 West 72nd St. on the Upper West Side.
But recently, the company has bid on more single-family residential projects in the outer boroughs and suburbs, hoping that these jobs will insulate it financially if there were to be a second shutdown and give workers the space needed to more easily maintain social distancing and coronavirus protocol and standards, Filler said.
“If there is a shutdown in the city, we’re looking at the suburbs like Westchester, Long Island to keep a core group of guys and girls employed,” he said.
It would be hard to predict what would happen if there was another shutdown, but Filler said the company may have to shrink down the size of its field crew, a group of workers that Tribesman kept employed during the first shutdown.
"I really hate to say that," he said. "We keep a core group of people here, but that may be the reality."