NYC Construction Costs on the Rise
October 12, 2012
Around Town By Neal Tepel
Construction costs in New York City continue to rise, and may be approaching the inflationary rate experienced during the height of last decade's building boom, according to a New York Building Congress review of multiple cost indices.
According to Engineering News-Record's (ENR) Building Cost Index (BCI), construction costs in New York City rose 3.55 percent in 2011. This is in addition to a 2.42 percent increase in 2010, which came after a 1.94 percent decline in 2009. ENR is projecting a 4.30 percent increase in construction costs for 2012, compared to mid-year 2011.
ENR uses local prices for Portland cement and lumber, the national price for structural steel, as well as local union wages, plus fringes, for carpenters, bricklayers and iron workers, to derive BCI.
A further review of ENR's BCI survey found that the recent increase in local construction costs has been twice as large as national trends. Construction costs nationally rose 2.39 percent in 2010 and 3.58 percent in 2011. ENR projects a rise of 2.17 percent for 2012 over mid-year 2011, which indicates a potential slowing of the national rate, compared to an escalation of the City rate.
However, a separate survey of the New York metropolitan region by Rider Levett Bucknall (RLB) found that construction costs in the area increased by 2.13 percent in 2011. According to the RLB survey – which examines much the same data as ENR but also includes estimates of bid price changes, including overhead and profit – construction costs increased 0.54 percent for all of 2010 after falling by 3.39 percent in 2009. RLB is projecting a decline in costs (1.27 percent) by mid-year 2012 compared to mid-year 2011.
The current rate of local cost escalation is still less pronounced than during the boom years, however. The ENR BCI found that construction costs increased by 5.71 percent in 2008, while RLB estimated 8.18% for New York City.
"Given that the rise in New York City construction costs now surpasses national trends, the numbers are of concern," said Building Congress President Richard T. Anderson. "Rising costs will make it even more difficult for private sector developers to obtain financing for new projects, while further constraining the capital budgets of City and State agencies."
