Just Keep Building: How The NYC Construction Market’s Biggest Fear Is Fear Itself
Over the last few months, a variety of factors—the loss of the 421-a, the increasing difficulty of construction loans, frustrating approval processes—have slowed the industry and even stopped projects dead in their tracks.
But, two panelists of Bisnow’s New York Construction and Development event—which will be held on Nov. 1—say the construction market's still strong, fueled mostly by smaller developments.
Partner Engineering & Science principal Charles Tallinger (pictured, right, with Suzuki Capital's Colby Schwartz) says his firm’s working on approximately 50 projects throughout the boroughs, ranging in size from $1M to $100M.
While the lenders he’s working with (his firm helps lenders make sure construction companies' numbers and timelines are sound) has shifted from traditional lenders to more REITs, private equity funds and private lenders, Charles says these new parties understand and are willing to deal with NYC construction’s high costs.
While there’s been a definite slowdown in rental buildings following the expiration of the 421-a tax exemption, Bohler Engineering principal Joe Deal (pictured) says the facts and figures just don’t mesh with the doom-and-gloom forecasts from economists.
“Those guys mainly act on potential economic indicators,” he tells Bisnow, “but I look at the facts, and things aren't slowing down. I’m getting new projects every day and there are many more going through the approval process and will start soon.”
In fact, there’s so much construction for smaller residential projects and self-storage properties that there’s been a huge rise in non-union worker activity to keep up.
But, if the doom-and-gloom continues to loom and developers grow more hesitant, it’s possible there could be a “hangover effect” that causes a rapid slowdown, Charles says. If work dries up, Joe adds, unions will try to regain their control and leverage.
But, Charles says, any developer worth its salt will be able to handle itself, as the fundamentals—good location and sponsors—haven't changed and won’t change even in the worst-case scenarios.
Learn more about NYC's construction activity at Bisnow’s New York Construction and Development event Nov. 1.