A lot has been going on in the past few years, and companies involved in New York area construction have struggled to keep up. Since 2020, developers, contractors, and facility managers have had to balance the impacts of a debilitating pandemic, an exodus of NYC residents, dramatic shifts in commercial real estate use, nationwide labor shortages, and the effects of global political pressures.
But the excitement isn’t over yet. New York area contractors will continue to face changes and uncertainty. We’ve listed five factors that are most likely to affect NYC contracting in the coming year.
1. Steel Prices
During the pandemic, steel prices skyrocketed, climbing from a low of $238 per tonne to a high of $974 per tonne. But, as the chart below illustrates, the rollercoaster is not going straight up. Instead, the price of steel is spiking up and down dramatically, affected by the war in Ukraine, outbreaks in China, shortages of raw materials, and efforts by U.S. manufacturers to ramp up production.
Construction projects are hit hard by these volatile steel prices as the costs of everything from doors to beams to forklifts are affected. While market costs go up and down, manufacturers are unlikely to lower the prices of end-use products until they feel very confident in the long-term cost-reduction of raw materials.
2. Labor Shortages
Employment rates have made the news nationwide, but the effects are exceptionally apparent in the New York metro region. While the entire nation has felt the impact of record numbers of early retirements and other labor shifts, NYC is also suffering from an exodus of workers. From July 2020 to July 2021, New York’s population fell by 319,020 people, the largest numeric decline of any state in the country, according to Census Bureau estimates. New York County alone lost 110,958 residents. Fewer residents mean an even tighter labor pool.
3. Supply Chain Challenges
We’ve talked about supply chain issues before, and they’re not going away anytime soon. The multiple stresses caused by the Covid-19 pandemic, labor shortages, the war in Ukraine, and a new urgency to reduce greenhouse gases have slowed the global supply chain.
Pre-pandemic, businesses didn’t have to give much consideration to shipping and distance. But at least in the near future, any materials shipped internationally or that rely on raw materials from international sources will experience unreliable production issues. And that means we’re not done with shortages yet.
4. Expansion of the NYC Tech Hub
Anyone living in the metro region has heard about the major tech expansion in New York. Apple, Facebook, Google, and Amazon have all taken advantage of lulls in New York real estate and are finding big spaces to aid expansion. And when industry leaders act, smaller companies follow. This flood of new leases to tech firms is leading to renovations to existing premises.
The industrial sector has also seen a resurgence in purchasing and renovating office space. Companies leased 864,000 square feet of industrial space in New York City during the third quarter of 2021, up 47% compared to the second quarter.
Amazon alone added at least nine new warehouses in Manhattan to process the 2.4 million packages it delivers each day. Amazon also runs another 12 warehouses in the five boroughs and two dozen more in the surrounding metro region.
As a result of all this activity, NYC has evolved into the second-largest startup ecosystem in the world, with more than 9,000 startups, 44 coding schools, and more than 500 programs for tech training and education. This fast-growing industry promises to provide development and construction opportunities for decades.
5. Hospitality Construction on the Rise
While some landlords wondered what to do with hard-to-lease office space, others decided to convert to high-margin hotels. As a result, New York City hospitality construction is red hot.
In the 4th quarter of 2021, construction was underway in NYC for 108 hotels with 19,439 rooms, and an additional 42 hotels were in late-stage planning. This boom translates into a lot of work rebuilding or repurposing in all parts of the city.
How Can You Navigate These Changing Times?
A fast-changing world can feel overwhelming, but every shift in the status quo is also a great opportunity for smart businesses. Here are some approaches to consider.
Stay on Top of Price Changes by Creating a Close Relationship With Distributors
Metro Interior Distributors stays on top of what’s happening today and what’s likely to happen tomorrow. Our experienced sales staff can notify regular customers of future changes and may encourage them to order early to avoid upcharges. When you develop a relationship with your building materials supplier, you’re better positioned to work around price increases and shortages.
Create Efficiencies to Ease Labor Shortages
Planning and organization are the keys to improving both productivity and employee satisfaction. Well-run projects get done faster, require fewer people, and are much less stressful for workers. Check out our article on Labor Shortages and Lean Construction to discover ways to make your worksite more efficient.
Reduce Impact of Supply Chain Delays with Value Engineering
There are thousands of parts to any construction project. Some materials simply can’t be substituted, but many others have a range of viable replacements. The concept of value engineering is based on getting more for your money without sacrificing quality. At Metro, our sales team is skilled at using value engineering to help our clients and customers find the supplies they need, meet all quality specifications, and even uphold aesthetic requirements. Read more about value engineering in this article.
Leverage Growth in Tech and Hospitality
More tech companies mean the need for more space, new leases, more retrofitting, and more new construction. The team at Metro can help our customers create competitive estimates by employing value engineering and lean construction strategies. We can give our customers a heads up on price increases and potential supply chain issues. And we can help develop scheduling, think through kitting and support timelines with reliable availability and on-time deliveries. Working with a better distributor is one of the easiest ways to become a stronger, more profitable developer, contractor, or facility manager.
Want to learn more? Check out these related articles.