Construction in New York Surprisingly Resilient

David Goldsmith

All Powerful Moderator
Staff member
In a recent interview Gary Barnett of Extell made it sound like no one is going to build anything in New York City for the next 5 years.
But according to this article in TheRealDeal it appears the construction industry made it through the pandemic with lest than expected damage and is projecting plenty of work through the recovery.

Some of this is because general contractors lowered their margins in order to keep their tradespeople busy, which I predicted would be one of the results of the Housing Stability and Tenant Protection Act of 2019.

Construction industry at ‘inflection point’​

Ranking the general contractors that kept building up while the city was locked down​

With global supply chains, an inherent need for on-site workers and a client base that depends on optimism, construction firms faced challenges on several fronts when the pandemic shook the world economy last spring.
Suppliers scrambled to secure materials, rapidly shifting regulations shut down projects for months, and economic uncertainty led to a plunge in new starts as many developers opted to wait things out.
But a year on from the initial shock, general contractors are getting a handle on the new normal.
“I feel that the construction industry as a whole handled the pandemic extremely well,” said Lance Franklin, co-CEO of New York-based Triton Construction, which made the top 10 in The Real Deal’s annual ranking of the city’s biggest general contractors. “We all adjusted to it quite quickly in terms of mask-wearing, in terms of taking everyone’s temperature as they entered the sites and in terms of doing contract tracing if there was an exposure.”
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A handful of workers on Triton’s projects in the city were exposed to the virus, Franklin said, and some projects faced delays early on in the pandemic. But the firm is still moving forward.

In March, Triton broke ground on the 950,000-square-foot residential complex at 101 Lincoln Avenue, the second phase of Brookfield Properties’ Bankside megaproject on the Bronx waterfront.
Even as the industry looks forward to a post-pandemic recovery, general contractors will still have to grapple with many of the same challenges they were facing before the crisis, like rising material costs and a chronic shortage of skilled workers. But at the same time, the Biden administration’s ambitious infrastructure plan has raised hopes of a construction boom in the coming years.

“It’s really a very important inflection point for the construction industry,” said construction lawyer Barry LePatner, founder of LePatner & Associates, which represents the Related Companies and Starwood Hotels and Resorts.

By the numbers

After peaking in 2016, construction activity in the five boroughs has been on the decline for four straight years, according to an analysis by the Real Estate Board of New York.

In 2020, just 1,760 new building plans were filed with the city’s Department of Buildings, the lowest tally since 2012 and almost a 10 percent drop from 2019. The total square footage of new filings fell 28 percent to 42.67 million square feet, while the number of residential units dropped 18 percent to 27,402.
TRD examined all new and renewed building permits issued across the city between April 1, 2020, and March 31, 2021, to rank the firms that have managed to stay the busiest, taking into account changes in the DOB’s reporting as it transitions from its DOB BIS database to the new DOB Now system.

According to TRD’s analysis, AECOM Tishman was the most active general contractor in the city in terms of ground-up new construction, with more than 11 million square feet in active projects. Lendlease, New Line Structures & Development, Lettire Construction and Gilbane Building rounded out the top five.
For alteration work, TRD tallied companies on the basis of initial estimated project costs. By that measure, Turner Construction was the busiest firm by far, with active projects totaling more than $2 billion — more than twice as much as the second-ranked firm, Structure Tone, whose figures also include its Pavarini McGovern subsidiary. Other big players in the alteration space included J.T. Magen & Company and AECOM Tishman.

“One of our biggest challenges in 2021 will be adapting to new ways of delivering projects safely, and possibly being able to ramp down and ramp back up quickly depending on other events,” said Jay Badame, president of AECOM Tishman, which made headlines last year for its completion of SL Green’s One Vanderbilt, the 1.7 million-square-foot office tower beside Grand Central Terminal.

“Covid has forced us to rethink the entire construction process in significant and lasting ways,” Badame said.

Labor lurch

As construction projects ramp up across the city, a lack of workers in specialized trades continues to bottleneck the industry.
In the early days of the pandemic, the unemployment rate in the U.S. construction industry spiked to 16.6 percent in April before falling back to less than 10 percent, according to U.S. Bureau of Labor Statistics. But before then, the sector’s unemployment had fallen to 3.2 percent in late 2019 — the lowest point this century.

Not only have fewer young people entered the construction field in recent years, more experienced workers have been going elsewhere.
“We witnessed subcontractor labor choosing early retirement and relocating out of the tri-state area, resulting in a decline of local skilled labor,” said Maurice Regan, CEO of J.T. Magen & Company, which has won several new interior projects, including Facebook’s new offices at the Farley Building, BlackRock’s space at 50 Hudson Yards and TikTok’s headquarters at One Five One (formerly 4 Times Square) in Midtown.

Many subcontractors under financial stress let workers go in the past year, exacerbating the problem, said Regan, whose firm placed third in the alteration-work ranking.
At the same time, contractors’ efforts to keep workers busy through the lean times last year could have negative consequences in the long term, according to LePatner.
“Contractors large and small are bidding lower than they would ordinarily, just to keep their manpower going until normal times come around,” he said. “That’s a risky strategy because there’s minimal to no profit, and in some cases losses.”

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Onshoring

Construction costs continued to rise during the pandemic, and New York City is still one of the most expensive cities in the world to build in.

Trump-era trade wars had already caused problems, but the Covid crisis wrought even greater disruptions in the global network of construction suppliers, driving up costs still further.
Several firms said that they continue to see spikes in the prices of various commodities more than a year into the pandemic — from lumber and steel to gypsum, copper and concrete — as well as delays in fabrication and delivery.

“We will continue to see this rise until facilities can get back to normal production schedules,” said Dan Fine, general manager at Turner Construction, whose projects include Tishman Speyer’s Spiral at Hudson Yards, which topped out last year.
Going forward, LePatner said, more companies may seek to shorten their supply chains and move sourcing back to the U.S. — in part as a response to vulnerabilities revealed by the pandemic, and in part due to incentives provided by the Biden administration to bring back manufacturing jobs.

“It’s going to make our domestic supply chain more reliable, although we’re going to see product costs in many situations rise at least 20 percent,” he said. “But that may be the price to pay.”

The infrastructure decade

While sectors like hospitality and retail have taken a serious beating, others are well positioned to keep growing, and construction firms are eager for the work.

“We expect the residential market to continue to grow, especially in the outer boroughs, with more focus on the environment, amenities and work-live-play complexes,” said Lisa Hickerson, manager of business development at Turner. The markets for life sciences, industrial facilities and data centers also accelerated in the past year, she added.Many firms say they are also paying close attention to the Biden administration’s infrastructure plan, as well as the billions in federal stimulus dollars slated for New York City.

“Investing in schools and hospitals and libraries and transit locally creates thousands of good-paying jobs,” AECOM Tishman’s Badame said.
A trillion-dollar overhaul of the nation’s aging infrastructure would mean “well-paying jobs for tens of thousands of specialty trades, such as certified welders, concrete strength test technicians, highway construction managers, all of whom will need the proper backup and support,” said LePatner.

And while much of the nation’s population growth and new construction in the coming decades will be in the Sun Belt, plenty of work needs to be done in New York as well — for the renovation of aging buildings, as well as retrofits to meet looming emissions caps.
“We’re going to see New York have its own building boom,” LePatner said, “because so many of our buildings are 40, 80 and 150 years old.”
 

David Goldsmith

All Powerful Moderator
Staff member

Sky-high lumber prices are starting to impact apartment construction​

Softwood lumber costs jumped 83 percent from a year ago​

Multifamily developers are starting to feel the pain of sky-high lumber costs.
The price of softwood lumber jumped 83 percent from a year ago, the Wall Street Journal reported, citing data from CoStar Advisory Services. That jump has led to an increase in prices for single-family homes, and now it’s trickling down to developers of apartment buildings, too.

The costs of materials used in multifamily construction — including lumber, fuel, copper and steel — have increased 25 to 30 percent over the past year, the publication reported. That is the biggest increase since 1988.

Analysts say these costs could cause profit margins to narrow, especially if rents remain unchanged. It could also lead to a slowdown in construction.
Apartment buildings are largely made of glass, steel and concrete, but wood is often used for floors, as well as decorative elements like cabinets. But the high cost of limber is not expected to have an will have an impact on new luxury high-rises in places like New York and Miami that use technologies that do not require wood.
 

David Goldsmith

All Powerful Moderator
Staff member

City Council pitches crackdown on construction “body shops”​

Bill comes at behest of Local 79, battling nonunion firms for market share​

Construction unions may be nearing a victory in their war on “body shops.”
A new City Council bill would impose licensing and disclosure mandates on companies competing with union labor at construction sites.
The bill, expected to be introduced by Council member Diana Ayala on Thursday, would require labor brokers to obtain a license from the city and report their workers’ demographics, wages and benefits twice a year.
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The measure has been sought by the construction laborers union, Local 79, which wants the city to crack down on nonunion companies that supply low-wage laborers to general contractors. The union accuses them of exploiting women and the formerly incarcerated in particular.
“Construction body shops provide developers with a cheap labor pool, made up of black and brown justice-affected nonunion workers,” Ayala said in a statement. “Body shops take advantage of the scarcity of employment opportunities for re-entry workers, and effectively force these workers into dangerous jobs, with no training, for low pay. They prey on the fears of resentencing.”

But the nonunion firms say their jobs are a lifeline to people leaving prison, providing them with pay and skills that help them get back on their feet. Union construction jobs are much harder to get, they say, and involve navigating a system that is confusing and arcane for many New Yorkers.
Under the proposed legislation, companies applying for a license must provide proof of insurance, disclose their ownership structure and certify that they comply with the law. The city can deny a license if the company — or an affiliated predecessor — has outstanding legal penalties or if the Department of Consumer Affairs and Worker Protection deems that it “lacks good moral character.”

Companies that operate without the license would face $200-a-day fines. General contractors, subcontractors and licensed employment agencies/organizations would be exempt. A separate City Council bill is seeking to require general contractors to obtain a license.
Over the past decade, unions have lost ground to nonunion general labor firms, especially in the affordable housing market. Local 79, however, has negotiated with developers, agreeing to wage concessions to win work.

Last month the City Council’s Committee on Consumer Affairs, which is chaired by Ayala, held a hearing on employment agencies and other labor-placing businesses. The meeting largely focused on body shops, as the union calls them.
At the time, the Real Estate Board of New York proposed alternatives to address allegations of exploitation, including increasing funding to the Department of Consumer Affairs “to better protect justice-involved and other vulnerable workers from wage theft and other unsafe or illegal practices.” The organization also pitched requiring that workers on publicly funded construction jobs be paid more than minimum wage, plus benefits.

Such a measure, according to the group, could include local hiring and reporting requirements to increase transparency. The group also urged the City Council to find ways to “grow the construction industry as an avenue for a more just and equitable workforce” and partner with nonprofits that work with both union and nonunion workers.
“REBNY recognizes that private-sector union construction is essential to the development of New York City, and our members account for most of the union construction contracts,” the organization stated in written testimony. “However, it is not practicable to contract union work for the entirety of all jobs.”

During the hearing, Local 79 members recounted their experiences working for companies they identified as “body shops.” Workers described low pay and poor working conditions — and bosses who took advantage of the fact that losing the job could mean reincarceration.
“While we are coming out of a pandemic, there is a pandemic of exploitation that is happening in the industry,” said Mike Hellstrom, president of the Mason Tenders’ District Council. “These labor service providers are profiteering off the back of labor.”
 

David Goldsmith

All Powerful Moderator
Staff member
Even with construction doing OK another Softbank investment heads South.

Troubled construction startup Katerra will shut down: report​

SoftBank-backed company struggled with delays, cost overruns​

Another SoftBank-backed startup has imploded.
The construction startup Katerra, which aimed to transform the $12 trillion global construction industry, told employees this week that it is shutting down, The Information reported, citing sources familiar with the matter.
According to the publication, the company plans to cut thousands of jobs — potentially without paying out severance packages or unused time off — and may end up walking away from construction jobs it was contracted to build.

Katerra was founded in 2015, and had received more than $1 billion in funding from SoftBank, which had also poured money into WeWork. At one point, it was valued at $4 billion.
The Information’s report says that a company executive cited the Covid-19 pandemic, along with soaring labor and construction costs as reasons for its latest financial difficulties.

But Katerra had issues prior to the pandemic. Its record of delivering on its projects was patchy, and the company struggled with delays and cost overruns. Though it had previously employed around 8,000 people, it laid off hundreds of employees last year.

The company also faced an investigation into its accounting practices by the Securities and Exchange Commission and by its board of directors, according to The Information.
Last year, the company was reportedly exploring the possibility of Chapter 11 bankruptcy proceedings, until it was bailed out by a $200 million cash infusion from SoftBank. That round of funding gave another SoftBank-backed company, Greensill Capital, a 5 percent stake in the company in exchange for erasing more than $400 million in debt. Greensill also collapsed earlier this year.

Katerra’s founder Michael Marks and CEO left the company last May. Paal Kibsgaard, the company’s most recent chief executive, departed last month.
The company has 2,434 employees, according to its LinkedIn page. A spokesperson for Katerra did not immediately respond to a request for comment. SoftBank also did not return a request for comment.
 

David Goldsmith

All Powerful Moderator
Staff member

Construction wage theft bill passes state Senate​

Measure, which would be a win for unions, heads to governor’s desk​

In a win for construction unions, a bill that shifts more liability to contractors is heading to the governor’s desk.
The state Senate on Wednesday voted in favor of the measure, which forces construction managers to assume responsibility for unpaid wages, benefits and attorney fees on their projects.
Typically, a worker will file a lawsuit against their direct employer, a subcontractor, to recoup wages. The bill, sponsored by Sen. Jessica Ramos and Assembly member Latoya Joyner, aims to ensure that construction managers are liable for the actions of those they hire and to incentivize “the construction industry to better self-police itself,” according to a legislative memo.

“No New Yorker can or should work for free,” Ramos tweeted soon after the bill’s passage.
An earlier version of the bill passed in the Assembly in January, but the measure was amended and re-passed by that chamber on Tuesday.
The latest iteration provides a few exceptions to the liability requirements, allowing construction managers to withhold wages in cases where subcontractors fail to provide certain payroll information. It also creates the option for a collective bargaining agreement to waive the bill’s requirements. And liability is limited in cases where legal action has been taken. In such instances, construction managers are responsible for wage theft that occurred no more than three years prior to when the claim was filed in court.

The bill would also allow the subcontractor to authorize any “person, organization or collective bargaining agent” to file a complaint on its behalf. The measure, backed by the city’s construction trades, faced some opposition from nonunion construction groups, which argued that wage theft should be handled by the Department of Labor, the state attorney general and local district attorneys, rather than third parties.

Gary LaBarbera, president of the state and city chapters of the Building and Construction Trades Council, said the bill is an important tool to combat wage theft for all workers on privately funded projects.
“From day-one, this legislation was all about putting the interests of working people ahead of those of unscrupulous contractors in the construction industry,” he said in a statement.

LaBarbera made the bill a priority for this legislative session, which ends next week.
 

David Goldsmith

All Powerful Moderator
Staff member
"Hirings in real estate and rental and leasing slowed from April. The construction industry lost 20,000 jobs as employment in non-residential building declined. The rising demand for new homes reflected in spiking prices has outpaced the growth in hiring, with residential construction hirings up only slightly in May."
 
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