cost increase since 2020
residential share of 2025 pipeline
office buildings for conversion
tallest planned tower
REINVENTION
New York continues to reinvent its high-rise landscape
The modern skyscraper was born over one hundred years ago in New York and Chicago, and the early twentieth century’s New York skyline was defined by a ‘race for the sky’, typified by the Chrysler Building and The Empire State Building.
For most of this time, the ‘tall building’ was defined by a commercial office tower constructed in steel in the USA. The typology is now truly global, mixed in both use and materials, though New York still has much to teach about a commercial approach to tall building construction.
Whilst the city’s zoning laws have created its iconic ‘wedding cake’ setbacks, the typology has expanded to include high-value pencil thin residential towers overlooking Central Park, the development of a new high-rise district at Hudson Yards, and tall landmarks headquarters for major corporations.
Currently there is a mixed but resilient market for core and shell construction of new tall buildings in New York City. While interest rate increases have eased from their peak and material cost inflation has slowed, they remain historically high and the new-build commercial office market is subdued. New work is instead being driven by residential projects, together with a focus on renovating existing commercial office towers.
TRENDS SHAPING THE HIGH-RISE MARKET
NEW YORK
Projects shaping the skyline
VOLATILITY
Rising costs and persistent uncertainty
Material cost volatility
While the extreme price hikes seen during the pandemic have eased, costs remain high and volatile, with key materials impacted.
- Metals: tariffs and trade adjustments, or even the anticipation of them, are causing price swings in steel, aluminium and copper. Copper is a particular pressure point, with prices for common pipes and wire seeing significant year-on-year increases.
- Aggregates: New York's reliance on imported crushed stone, gravel and sand from neighbouring states or abroad, combined with local production constraints (permitting issues), results in higher costs and potential delays, especially in urban areas like Manhattan.
- Lumber: prices have fluctuated, influenced by soft demand due to higher interest rates but with potential for an upward shift as residential construction is expected to rebound in mid-2025.
Long lead times
Supply chains for specific, often imported, components remain fragile.
- Specialised equipment: critical items like large generators (over 3,000 kW) have global lead times extending over a year, and medium voltage transformers are also seeing significant delays due to high demand from data centre and infrastructure projects.
- Manufacturing delays: general manufacturing delays for finished goods, including certain HVAC components, continue to impact project schedules.
Logistical Challenges
- Port congestion: shipping delays at major ports like the Port of New York and New Jersey harbour can further limit material availability and drive up prices.
- Urban logistics: navigating New York City's dense urban infrastructure for deliveries adds complexity and cost compared to rural projects.
- Labour shortages: the most significant and ongoing challenge is a severe skilled labour shortage. More than 90 percent of contractors nationwide reported difficulty filling positions in 2024. An ageing workforce, lack of skilled trades experience, and other factors are pushing up labour costs and slowing project timelines.
The combined impact of these factors is that the cost of shell and core construction for towers in New York has risen significantly in recent years by circa 30 percent.
COMPARISON
This is also being exacerbated by the effects of more stringent sustainability mandates for new-build, high-rise projects, and the greater expectations of commercial occupiers and residents alike for higher quality and more amenities.
BENCHMARK
New York’s 2025 key cost ranges by sector
*Costs exclude finishes, demolition, external works and utilities.
TRAJECTORY
Future outlook
New York is an expensive place to build, but has a long history of making commercial success a project imperative. It is now entering a new phase where that imperative will become ever more critical in the face of macro and micro economic challenges and the development of the tall building typology in the city.
The changing regulatory landscape
The expiration of the 421 tax abatement programme, which provided tax incentives for conversations to apartments, caused a slump in new residential permits in 2023 and 2024. The effectiveness of its replacement, the 485-x programme, and the efficient allocation of federal Bipartisan Infrastructure Law funds, is still being assessed, but will be critical to sustaining future residential construction momentum.
Similarly, New York City's Local Law 97, which penalises high carbon emissions, is spurring a boom in green construction and retrofitting, creating a new market niche and significant opportunities for firms specialising in sustainable building. For tall building projects to have long-term value, they will need to embrace green construction and take advantage of this growing skills base.
A commercial resurgence?
Total construction spending was projected to reach $74 billion in 2025 in nominal dollars. Of this, residential development spending is outpacing non-residential for the first time in many years, driven by the city’s housing shortage and office-to-residential conversions. However, as the market starts to anticipate future interest rate cuts, we are likely to see significant increases in spending on commercial office building construction over the coming months and years.
Effective procurement
Like all major cities, New York has its own preferred ways of procuring construction projects. However, in this era of unparalleled volatility and complexity, we can learn from trends that are shaping modern major schemes elsewhere around the globe, not least the use of the Construction Manager at Risk (CMAR) model of procurement. This is used for certain complex projects where the Construction Manager will be responsible for risk over and above the agreed Guaranteed Maximum Price (GMP) ceiling, and can be used to engage selected parts of the supply chain in an even more valuable and efficient way.
A strategy for success
The complexity and challenges of the New York high-rise construction market mean a careful strategy is required to ensure projects are not derailed. Clients that are best set up for success will be those that procure early, and demand rigorous early alignment that accounts for complicated interacting factors such as zoning, active rail infrastructure, the evolving regulatory landscape, and local logistical constraints.
To enable this, projects will also need a strong vision from the outset. This will help to maintain elements of key value such as elegant architecture, strong amenity offerings, and commercial performance in the face of constraints.
EXPERTS
"New York is the most expensive city in which to build a tall building in the world. Building in Manhattan involves significant inherent risks including supply- chain stress, long and drawn-out regulatory processes and high labour cost rates."
Michael Hardman Vice President, New York
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