As Recession Grows, Some Projects On Hold

By Debra Wood
February 10, 2009

The recession has not only rocked New York’s financial markets. It’s also adversely affecting new building starts and putting some projects on hold.

The MTA has said it will spend nearly $500 million in stimulus money on the stalled Fulton Street Transit Center in Lower Manhattan.

The New York City Department of Building reports significant drops in new building permits. For instance, in December the city issued 110 permits, down from 343 a year earlier. In November 2008, only 88 permits were pulled, compared to 344 in November 2007. Overall in 2008, about 3,200 permits were issued – down nearly 34 percent from 2007.

“For the first time in several years, the [construction] industry in New York City is not clicking on all cylinders,” says Richard T. Anderson, president of the New York Building Congress. “What that means is certain sectors are dropping precipitously, and others are only beginning to slow down.”

Residential construction is at the top of the “precipitous” list, followed by office and other private work, he says.

Marilyn Davenport, senior vice president of the Real Estate Board of New York, says she has no data but is aware of projects that began excavation and foundation work but have now stopped.

“There is no question it is going on,” Davenport says, adding that 17,000 apartment units were approved and granted 421a tax abatements, which, in order to qualify, required the developer to break ground, start foundation work and secure permits. “Some will be put on hold while they wait to get financing,” she adds. “They need financing to go vertical.”

Activity continues in the public sector, at the Department of Environmental Protection and the Metropolitan Transportation Authority (MTA), and institutional work is strong, with New York University work continuing unabated.

“The public sector has only begun to slow down and is full of question marks with the next coupe of years,” says Anderson, estimating that public projects accounts for half of the city’s work. Construction continues on MTA’s East Side Access, 2nd Ave. Subway and Fulton Street Transit Center, however spokesperson Kevin Ortiz says future contracts and timelines for those projects will depend on the federal stimulus package. The MTA announced last week that the Fulton Street project would account for close to $500 million of the $1.5 billion in stimulus money it expects to receive.

The Building Congress’ Anderson says he does not expect planned stimulus packages to make much of a difference, saying, “If you look at an industry with $30 billion in construction and you add a billion, it’s not that high.”

Meanwhile the billion-dollar redevelopment plans for 26 acres of former rail yards in Midtown Manhattan have slowed. The MTA has extended the partnership period with Related Companies/Goldman Sachs, both of New York, for up to a year, citing the economic downturn and the collapse of traditional commercial lending. In a written statement, MTA says it and the private companies “remain fully committed both to the Eastern Rail Yard and Western Rail Yard projects and the business terms of the deal.”

The companies will pay MTA a nonrefundable $8.6 million in exchange for the extension, half of which may be used to offset costs associated with zoning and urban land use reviews. The plans have included both residential and office space.

The $4 billion Atlantic Yards project in Brooklyn is another mixed-use project rumored to be in trouble. It was slated to include office, retail, apartments and a new arena for the New Jersey Nets basketball team. Joe DePlasco, spokesman for developer Forest City Ratner Companies says an eminent domain court case is holding up that project, which had hoped to break ground last fall.

“Once the case is resolved and we are confident we will win it, we have to close with MTA, get funding and begin,” DePlasco says. He declined comment when asked if the slowing of the project was due to a lack of financing.

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