BY ROSS J. PEPE
The long-suffering recovery for the construction industry is finally taking hold, some five years after the official end to the Great Recession of 2008-10. What makes this recovery different from those in the early 1980s, 1990-92, and 2000-02 is the velocity of construction volume: it is one of the slowest rebounds in memory, according to longtime contractors and industry data. Let”™s give the economists who predicted a protracted “L” shaped recovery a bonus for predicting this one correctly.
One can see the shape of the “L” recovery in the hours worked posted by many of the union locals in the region. In one case, the International Union of Operating Engineers Local 137 based in Briarcliff Manor, hit a high-water mark for membership employment in 2007 when it reported the total number of hours worked at nearly 1.5 million that year. Over the next five years, Local 137 saw that total number of hours worked each year dwindle to a level that by 2012 hours worked had dropped by a third, down to 978,000. Today, after several years of gradual recovery, the number is climbing back, but it”™s still some 20 percent off its historic high. (Operating engineers are those highly skilled workers who operate the big cranes, bulldozers and loaders on construction sites for private and public-works projects.)
Among the forces contributing to the comeback of activity in the construction and building marketplace is the strengthening of the overall economy. State and municipal coffers are again being nourished by tax revenues from consumer spending (sales tax), home sales (mortgage and recording taxes), and a rise in travel and entertainment (hospitality and income tax). Low gas prices are also having a favorable effect on household budgets, leaving more cash in the wallets and purses to give consumers the confidence to make large purchases and take on new debt.
As in other economic recoveries, construction and building are always the first sectors to go into recession, and they”™re the first to come out of it. When postponing needed maintenance and repairs is no longer possible, owners capitulate by hiring crews to do the work. This often occurs long before the return of consumer confidence, so today, with the combined effect of low inflation and rock-bottom interest rates, developers and owners have mustered the courage to initiate capital projects.
Heading the list of construction activity in the region is the $3.9 billion project to replace the Tappan Zee Bridge. Some 150 specialty subcontractors and service companies have become part of this historic construction procurement contract that was assigned to Tappan Zee Constructors LLC in Tarrytown in March 2013. As was expected, the economic multiplier effect of this project is being felt far and wide. The replacement project is creating many hundreds of new jobs each week for what is expected to be a total of 6,000 jobs once the new dual-span crossing is completed in 2018.
In addition to transportation and infrastructure construction, other growth sectors to watch are health care, retail and government spending on the municipal level. In health care, virtually all the major hospitals in the region are either advancing or completing building and expansion projects as the competition for the health care consumer increases. Many institutions are repurposing office buildings for medical clinics and offices, which is an attestation of the attractiveness and appeal of the Westchester market.
Another growth area is the education sector where schools and college boards are addressing the physical needs of their buildings. Case in point is the city of Yonkers where the average age of its public school buildings is approximately 80 years, with one dating back more than 100 years. These inefficient and underperforming properties must now be rehabbed or repurposed as the field of education continues to undergo major transformations.
Here”™s a list of projects that will help fuel construction employment over the coming months:
”¢ Projects resulting from some $2.5 billion in new monies for infrastructure improvements resulting from the bank settlement “windfall” penalties earmarked by New York state in the fiscal year 2015-16 budget;
Ӣ The $2.2-billion Champlain Hudson Power Express project that will be placed in waters along the proposed route beneath Lake Champlain and the Hudson River;
Ӣ Another massive driver of construction work in the region is the $1 billion project in Orange County to build a 2.5-mile-long bypass tunnel approximately 600 feet below ground, around a leaking portion of the Delaware Aqueduct, which provides drinking water to New York City. (New York City has invested more than $20 billion in water-quality projects, which have been a mainstay of employment for the local building trades over the past two decades.)
Ӣ New York State Department of Transportation plans to spend nearly $100 million for the bridgework throughout the Westchester/Hudson Valley region;
Ӣ The Westchester County Department of Public Works indicated plans for $185 billion in capital projects in 2015, including an estimated $71 million in the second quarter and $17 billion in the third quarter; and
Ӣ The effects of the $1 billion casino project in Sullivan County is already being felt throughout the region as local contractors and service companies compete for the utility, infrastructure, site development and the building portions of the development.
As the region”™s contractors and building trade crews return to work with greater regularity, those enterprises that survived the recession and the two harsh winters that followed are looking at that “L” shape recovery with new-found appreciation for what it truly represents: long in coming and now lucky to be back in the thick of it.
Ross Pepe is president of both the Construction Industry Council of Westchester & Hudson Valley Inc. and the Building Contractors Association of Westchester & Mid-Hudson Region Inc., and serves as treasurer of the New York Roadway & Infrastructure Coalition. He can be reached at 914-631-6070 or ross@cicnys.org.
