NYC’s construction industry is building the future by looking at the city’s COVID limitations - by Phillip Ross

It’s often said that COVID didn’t change the industry as much as it accelerated longer-term changes that were already underway. There is a lot of truth to this. In the past year, we’ve seen new industries growing alongside New York’s traditionally dominant residential and commercial office markets, such as life sciences, healthcare upgrades, medical office buildings, logistics, manufacturing, and data centers. Part of what COVID showed us is what is also going to drive a far more resilient and expansive range of work for the foreseeable future: The limitations of our current built environment to meet our rapidly evolving needs.

COVID of course didn’t create, for example, the demand for biotech, local manufacturing, last-mile distribution, or secure server space overnight, but it certainly drove heightened levels of demand that are unlikely to subside for the foreseeable future. This kind of diversification, though, will ultimately be healthy for New York’s built environment, and if the construction and design experts at Anchin’s recent Future Forward event are any indication, the city’s built environment firms are excited for what the future will bring.

Macro issues in building and infrastructure markets often take time to be recognized, and public and private stakeholders have years to strategize and adjust to market shifts and environmental and social needs. COVID, however, was a sudden shock to the system—and market demands shifted overnight. “New York has been hit harder because of its density and complexity to how we operate as a sector in the industry,” said Everard Martin, president, Broadway Construction Group. “We have to focus on how we create demand.”

The demand is certainly there but in new places. The city’s industrial stock, which was in the gradual process of updating for new logistics and manufacturing needs, was immediately inadequate to the task of meeting the metro area’s demand for e-commerce. Healthcare infrastructure in need of flexibility and more sophisticated HVAC was exposed. Similarly, the popular interest in life sciences reinforced the city’s lack of lab square-footage. All in all, there has been years’ worth of change in the last 12 months. “In no sector is that more evident than in the e-commerce sector,” said David Gockel, president, and CEO, Langan. “Across the country, we’re exceeding even aggressive projections for how much e-commerce work we are delivering.”

More than just volume, these projects require fast turnaround times, even in as few as three months. “We’ve done a lot of projects for Amazon, and these are fast-track projects,” said Tony Mann, president, and CEO, EJ Electric. “We see that as continuing.”

The industrial and logistics revolutions touch all of the boroughs in a way that just hasn’t been seen in New York City in decades. Similarly, life sciences square footage was in major demand before COVID, but the pandemic response reinforced the urgent need to support more proactive medical research, and this requires much more purpose-built laboratory space that doesn’t exist right now. Unlike warehouses, this isn’t a quick fix, as the spaces require a great deal of specialized and sophisticated building infrastructure, which also requires public sector help.

“The life science market in New York is and will continue to be a tremendous growth opportunity,” said Guy Geier, managing partner, FXCollaborative. “There’s a lot to do in terms of trying to get codes and zoning and other regulations sorted out so that it can be more accommodating to life sciences, but there’s been a lot of work done in that regard.” He added that “The healthcare industry in New York has always been very strong both in terms of patient care and in research and I think we’ll see a lot more research and development in New York. It has a tremendous, positive impact on the economy of New York and the AEC community as well.” Healthcare was put to a stress test unlike the country has seen in a century, and hospital systems came away with lessons learned for future resiliency.

“The long-term play here is that hospitals are upgrading,” said Mann. “They realized their limitations when they were put to the test during COVID and realized what they needed to do. That ranges from HVAC system upgrades to augmenting air filtration systems that allow them to isolate parts of their buildings for future COVID outbreaks.”

Flexibility also became a major concern, as fast conversion and field hospitals were needed for the way of patients in the early days of the pandemic. “They’ve also realized they had emergency power systems that were not built for the needs they had,” said Mann. “These are major projects. We see them designing for flexibility. They’re looking at what their future needs are. A floor may be changed, a wing of a hospital may be changed to a different purpose on an emergency basis. They’ve got to set themselves up so they can do that in the future. They’re really thinking long term.”

While these industries were propelled forward if painfully, the city’s much-needed infrastructure work has been held back due to budget concerns. Design and construction leaders seem confident, however, that the public sector understands the necessity of these crucial upgrades and that with a recent change in administration, funding will improve to deliver on much-needed projects and initiatives, such as the Gateway Tunnel and Moynihan Station, among others.

“Gateway is definitely back on the table with the Biden administration and their commitment to spending money on infrastructure,” said Geier. “Time is of the essence. The two existing tunnels were damaged going back to Sandy and they were in deteriorating shape before that. The new tunnels need to be done so that the old ones can be restored and fixed. All of that is supporting the need to expand Penn Station.”

“With the Biden administration and their support, the project is going to go forward, but I think there are also some constraints,” said Martin, “because the limited amount of resources [NY and NJ] have to contribute to the project may delay the start. There is truly a demand for it. It’s going to open up a lot of employment opportunities for a lot of people.”

Decreased tax revenues and budgets that were maxed out before COVID may mean that city and state governments and agencies turn to more flexible and resilient policies and capital ecosystems. “The biggest challenge is the ability of the local states and transit agencies to come up with any matching funding,” said Gockel. “The deficits that these states and local agencies face are going to introduce more public-private partnerships.”

Additionally, Gockel noted, “Many of these public transportation agencies are asset rich but revenue poor. Don’t be surprised if you see more of these public infrastructure agencies trying to monetize their assets.”

One way or another, infrastructure work needs to move forward, and New York’s construction industry is preparing to deliver the work that will keep New York thriving.

“I see these things as a necessity,” said Mann, “and we as an industry need to push it. It makes New York a strong city for the future.”

Phillip Ross, CPA, CGMA is an accounting and audit partner at Anchin, Block & Anchin LLP, New York, N.Y.