THE COVID IMPACT IS LESSENING, BUT GAINS TAKE TIME

There’s just no getting around the impact of 2020.  In one year, the U.S. construction industry lost 224,000 jobs, with 44,000 of those job losses coming from NY alone, the highest total of any state.  But although the state’s premier city continues to deal with the fallout of the COVID-19 pandemic and subsequent restrictions, shortages and disruptions, the NYC construction market is already showing signs of resilience.  In 2021, according to the Office of the NY State Comptroller, the construction sector in NY is on pace to add 96,000 jobs, with more than half of them expected to return in NYC.  And while there’s no denying the NYC construction industry took a hit, one sector in particular stands out as the strongest and fastest rebounding: high end residential construction.

Even with the rebound beginning, it’s taking time to realize new gains as the system balances itself out.  Pre-pandemic projects have been coming to closure and flowing into a lower-than-expected number of new construction projects.  New York Building Congress reports that from 2020 to 2022, residential construction is expected to add 50,450 new housing units, but the resulting spend is lower than pre-pandemic estimates by around $5 billion.  That’s a significant decline in numbers relating to the industry that ranked 4th in the city last year in terms of average salary.  The average salary in the NYC construction industry reached $87,200 in 2020, the fourth highest of any sector in the city, according to a new report from the state comptroller’s office.  However, heading into the close of 2020, new building filings were at their lowest since 2010 indicating that fewer new projects were being initiated.

REASON TO HOPE

All that said, it’s possible to flourish even in a downturn if you’re in the right sector, and the NYC and surround area high end residential construction market has shown both resiliency and determination coming out of the pandemic challenges.  Thanks to the optimism for the future that’s characteristic of New Yorkers, contracts to purchase luxury homes in Manhattan are outpacing their pre-pandemic levels, a statistic that can’t be said in almost any other sector or industry.  In March of 2021, one year after the pandemic began, 41 deals were signed for homes priced at $4 million or more, bringing the year-to-date total to 343, a 60% increase from 215 contracts in the same period of 2020. Manhattan’s luxury market is showing signs of a recovery even without many of the foreign investors who fueled deals in past years, indicating that the recovery in NYC is coming from within.  Donna Olshan, president of Olshan Realty, was quoted by Private Wealth as saying, “These are people who live in New York or are from New York, and they’re betting on the home team.”

Manhattan isn’t alone.  Real Deal reports that in the last two weeks of this September alone, Luxury contracts in Brooklyn jumped significantly to twenty-two, after weeks of not reaching the 20-contract mark according to Compass’s weekly report. This is up from the previous week, which counted 15 contracts signed.  Purchase prices were up as well, with the last 15 of those sales accounting for a combined $70 million, compared with $47 million for the 15 sales in the first week of September.

NEW DESIGN TRENDS EMERGING

These contracts are a major indicator of the continued strength of NYC’s luxury construction market, as contract sales drive renovations and renovations in turn fuel more sales.  But they are not the only indicator of the resiliency of the luxury sector.  Another key sign that the market is evolving are the new design trends that arose during the pandemic and have shown stickiness in the post-COVID world.  Two of the more noteworthy new trends identified in a recent article by CITYREALTY that are likely to continue to be a part of the ongoing luxury construction market are the inclusion of “Flex Spaces” that can be used for home offices, and designs that feature the union of indoor and outdoor living spaces.

Flex spaces became a necessity very quickly and make perfect sense in the newly minted and ever-evolving post pandemic world.  Many businesses that were forced to quickly transition into a distributed workforce model have yet to re-transition, and many will not, at least not fully, return to pre-pandemic norms.  A recent article by US News & World Report indicates that a third of companies surveyed anticipate no more than half of their employees returning to work inside a centralized office.  Anticipating this, the modern “flex working space” takes its place among current design trends in luxury construction and is driving new projects.

The development of blended indoor and outdoor spaces quickly became another ongoing trend coming out of COVID.  With New Yorkers confined to their homes, and with many building amenities either closed or restricted, the fortunate ones who could step onto their balconies or terraces for some fresh air quickly became the envy of the neighborhood.  It doesn’t take long from that point until developers and designers begin to realize and capitalize on the value of the feature, and the trend of “private outdoor space” begins to work its way into more renovations and new building projects.

NYC CONSTRUCTION IS RETURNING

During the summer of 2020, most transactions in the city were in the sub-$2 million market, a trend that can trace its roots to the fact that many high-end buyers had the means to leave the city at the height of the pandemic and did so. But now the higher-end market is starting to rebound. An article published by 6sqft tells us that 66 percent more $5 to 10 million contracts were signed in February compared to January and 33 percent more compared to February 2020.  This indicates a strong upturn in NYC’s prominent luxury market, good news for the construction industry.  Prior to the pandemic, the construction industry in New York City experienced eight consecutive years of growth.  During this period, construction was the city’s fastest-growing employment sector (43.5 percent), much faster than total private sector employment growth (24.3 percent).

CLT RECRUITERS IS YOUR GO-TO PARTNER

At CLT Recruiters, we’ve stayed on top of the rise and rebound of the NYC construction industry and we are here to partner with our clients as they navigate trends and work to stay ahead of the curve.  If you want to work with someone who knows this industry and can have a meaningful conversation with you about your unique challenges and opportunities, we invite you to start the conversation today.  We look forward to partnering with you as you continue to develop your business in the second half of 2021 and beyond!