Choke Hold: Recession Slows or Halts Projects Throughout Tri-State Region

BTEA: $5 billion in construction work shut down. City confirms “at least” 30 sites idled.

By Debra Wood

A new silence hovers over several New York City job sites, as construction activity screeches to a halt on several job sites.

The New York City Department of Buildings  has confirmed that work at least 30 construction sites has been idled, while the Building Trades Employers’ Association is reporting nearly $5 billion in delayed or stalled projects across the city.

“It's horrible,” says Louis J. Colletti, president and CEO of the BTEA. “I expect unless we make changes and decrease construction costs by 25%, unemployment could be as high as 50% by May.”

While high-profile mega-projects such as Atlantic Yards and Hudson Yards have hit the brakes, several other commercial projects have started to stall in recent months.

Developer Boston Properties of Boston recently suspended construction at the $980 million, 1 million-sq-ft office building at 250 West 55th Street after a major tenant backed out of its lease deal. At the end of December, Boston Properties reported the company had invested $425 million in the project. At that point, it was 22% leased. It was scheduled for completion in 2011, but now the company expects to reduce its capital commitments on the project through 2011 by $450 million.

Boston Properties also shut down development activity on its 840,000-sq-ft Eighth Avenue and 46th Street office project. It took a charge of about $23.2 million in land and air-rights losses, as well as forfeited contract deposits and planning and pre-development costs. Boston Properties held a 50% interest in that project.

Swig Equities of New York has halted plans to convert an office building at 25 Broad Street into condominiums and to build a mixed-use, 62-story hotel and condominium tower at 45 Broad after Lehman Brothers filed for bankruptcy.

Both developers, Boston Properties and Swig, sent written statements confirming work stoppage on the properties but declined to comment.

Also in New York City, the 58-story 56 Leonard residential tower has stalled. The developer the Alexico Group of New York and contractor Hunter Roberts of New York declined to comment.

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Similarly, a planned $600 million, LEED Gold, mixed-use facility in Battery Park City began construction in 2008, but work on the site appears frozen because of a delay in financing. A spokeswoman for the project’s developer, Time Equities, confirmed reports that the project could be delayed until 2012 and that the firm is awaiting a construction loan that may not come through until the third quarter of this year. She declined further comment.

Residential projects are feeling the biggest pinch, leaving the city pocked with dug-out foundations and excavated sites that now sit dormant.

“Some will be put on hold while they wait to get financing,” Marylin Davenport, senior vice president of the Real Estate Board of New York told New York Construction earlier this month. “[But] they need financing to go vertical.”

In the Bronx, the New York Botanical Gardens has placed its parking garage on hold, according to architect Polshek Partnership Architect of New York. The Botanical Gardens did not return messages seeking comment.

The $2 billion Revel Hotel & Casino in Atlantic City is one of two of the region's major casino projects that has been put on hold since financing has begun to dry up.

As the recession deepens, mega-projects outside of New York City are proving to be vulnerable, as well. The $1 Billion Concord-Empire Hotel and Casino in Kiamesha Lake, N.Y. was recently put on hold for as many as two years by project developer Cappelli Enterprises. The complex was to include a 500-room hotel, a casino, harness track and a 7,500-seat entertainment center. Construction – including the demolition of an existing hotel – began in 2008 and concrete operations were beginning when financing dried up, according to a spokesman for the developer. The spokesman declined further comment.

Meanwhile, Revel Entertainment, owner of the $2 billion Revel Hotel and Casino project in Atlantic City, has announced that construction on the site will halt once the exterior is finished. While the interior work will be delayed, the facility’s two, 53-story towers – which were to eventually include 1,900 hotel rooms apiece – will sit empty on the 20-acre beachfront site.

The BTEA’s Coletti says as the projects continue to fall like dominoes,  the industry won’t really begin to feel the effects until the region’s largest jobs – the ones still going forward – are completed.

“The trades are not feeling it yet, because there are still some jobs, such as the stadiums and the Bank of America building, finishing up,” he says. “I keep telling them to get ahead of the curve. When those jobs finish up, there is no other work to move to.”