Manhattan Awash with Stalled Construction Sites
By Nicole Bode, Jason Tucker and Serena Solomon
MANHATTAN — Manhattan is awash in stalled or delayed construction sites. Some are frozen by the downturn, or hobbling along with the help of reduced union labor costs. Others drag on, bolstered by city programs, in the hope that better economic times will return soon.
But experts say, in the short term, things are only going to get worse.
DNAinfo compiled a list of the top 10 sites around the borough where dismal financial conditions have hampered development or halted it entirely.
The list includes high-profile sites such as developer Larry Silverstein's planned Four Seasons Hotel at 99 Church St. Work on the TriBeCa corner plot is on hold through mid-2010, according to the Lower Manhattan Construction Command Center. It's also on the Department of Building's list of 80 stalled sites around the borough, among 531 around the city.
DNAinfo's top 10 also include lesser-known sites, such as 180 Ludlow St., on the Lower East Side, where developer Serge Hoyda recently had to convert his planned luxury hotel into an apartment building because he couldn't secure funding for the original project, his lawyer said. He's now waiting for the city to approve the necessary re-zoning.
Others on the list are on-again, off-again projects, including Hudson Yards on the far West Side and the Moynihan station project across from Madison Square Garden. Both of those massive projects have been in the works for years, if not decades, but have yet to break ground. Given recent economic conditions, their start dates have been delayed even further.
"Timing on a construction timeline will be determined by market conditions," Related Companies spokeswoman Joanna Rose said of the Hudson Yards project. Rose denied the project was behind schedule, and said it is currently going through the approval process.
The bleak outlook led the New York Building Congress last month to predict a 20 percent plunge in construction spending over the next year — a number one expert scoffed at.
"It's a joke. It is going to be much worse," said Louis J. Coletti, president and C.E.O. of the Building Trades' Employers Association, which has 1,700 union contractors as members.
Coletti was part of the team that forged the Construction Industry Partnership Project Labor Agreement in May. The agreement between union construction workers, contractors and developers led to an across-the-board rate cut among members to slash construction costs about 20 percent.
In exchange, developers have been able to jumpstart 43 sites so far, creating an estimated 25,000 jobs worth about $7.5 million, Coletti said.
One site that signed up for the plan was developer Bruce Ratner's Beekman Tower in the Municipal District, a Frank Gehry-designed apartment building that almost lopped off the top 36 floors of the planned 76-story building when financing evaporated earlier this year.
Thanks to the labor savings, the project is now working overtime to reach its full height by the time it is slated to open in 2011.
The project landed on DNAinfo's list because it was forced to shut down for three months this spring while Ratner tried to drum up additional funding. The opening day for a new public school housed on the building's lower floors was pushed back from this fall to next fall, The Real Deal reported. A spokeswoman for the developer says the building's topping-off ceremony is on track for this Thursday.
Still, the agreement between developers and laborers doesn't address the newly-stringent regulations by banks who are demanding more collateral up front from developers than ever before.
And some experts predict the temporary activity created by reduced labor costs will bottom out once the projects are complete — leaving the next round of developers on their own.
"Banks won't even talk to developers if they have anything less than 30 or 40 percent of their own equity," Coletti said. "Developers don't have the equity for new developments. They are worried about the ones they already have."
Michael Slattery, vice president of the Real Estate Board of New York warned, "the transformation of the market from last year until now is unprecedented."
One study, by Price Waterhouse Coopers, predicts that the rate of co-op and commercial real estate values will plummet between 25 percent and 40 percent over the next year.
The report predicts investors in New York will hold out for a “shakeout… among condo developers who built million dollar plus apartments in fringe districts — sales of those units likely won’t close without substantial markdowns.”
“The pace of market recovery depends on the hammered banking industry,” the report continues.
The City Council tried to stop the bleeding with a bill extending the grace period for developers to keep their work permit for up to four years even when no work takes place.
In exchange, the developers keep the city current on their work stoppage and vow to secure the site in the interim. When the developers can resume work, they bypass a thicket of red tape that would otherwise require them to start the permit application process from scratch.
“It will help the city’s unemployed and underemployed construction workers by getting back on the job faster and help offset the risk that stalled sites pose — better protecting our communities from unsafe, unattended and unsightly stalled construction,” Mayor Michael Bloomberg said after signing the bill into law last month.
Others in the city blamed developers for bringing a portion of the crisis upon themselves.
“They were being greedy," City Councilman Alan Gerson said of the glut of now-vacant luxury housing units that sprang up in his lower Manhattan district, drawn there in part by the city’s Liberty Bonds program.
"But that is what we expect for them to make as much profit as they can," Gerson said. "It's up to the government to balance the short-term profit with long-term community needs."
Gerson said he’s now encouraging developers to convert the high-end units into affordable housing.
A spokeswoman for the city’s Economic Development Corporation denied the bonds contributed to vacancy rates, saying seven of the 10 projects that qualified for bonds are close to finishing or have completed construction.