NEW YORK CITY

The US has a shortage of just over three million homes. Around one million of these are in New York City – a city that seems unable to build fast enough and thus has become one of the world’s most expensive.

New York has been hit hard by the shift to remote work: companies have generally opted to downsize their offices and move to newer, more modern facilities, leaving a glut of empty office buildings with few potential tenants. The obvious solution, of turning empty offices into new apartments, is challenging as many of these buildings have floorplates that are too big to turn into residential spaces without expensive modifications. It is, however, interesting to see several conversions taking place in lower Manhattan, even on buildings that are not suitable due to floor plate sizes – showing the depth of residential demand. This is a trend to watch over the next few years subject to capital being available. Many developers have resorted to creative financing approaches to get these projects off the ground.

Investment in hospitality projects remains challenging due to costs and labor union requirements producing razor-thin margins. The select service space and ultra-luxury conversions (where special permits can be obtained) reflect most hospitality projects in NYC as the moratorium continues. With union agreements coming up for negotiation in 2026 the hospitality market will be one to watch.

We expect the market to remain well below its pre-pandemic levels for the foreseeable future. Supply-chain issues and high escalation have made their mark and have kept costs high and spending down. Some growth is expected to come from federal infrastructure spending, but it is unlikely to offset declines in other sectors. Construction and real estate comprise 20% of New York City’s GDP while providing 10% of jobs and 5% of wages. Labor costs will likely rise in the next few years, as there has not been a corresponding increase in the labor market to offset this rise in spending.

* Other structures include religious buildings, amusement, government communications, and public recreation projects.
Source: BuildMarket

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