Sure, NYC Construction Labor Is Expensive. But That’s Only Half of It.

As the song goes, New York City is a “concrete jungle where dreams are made of.” But have you looked at the cost of laying concrete jungles in Manhattan lately?

Gotham holds the distinction of being the most expensive construction market on the planet, with the cost per square foot for new buildings averaging $534, according to a recent report from consultancy Turner & Townsend. For perspective, that now outpaces famously regulation-clogged California cities like San Francisco ($512 a square foot) and Los Angeles ($445) and global peers like Tokyo ($431) and London ($500). Even Old Amsterdam ($296) is considerably cheaper than New Amsterdam. 

How can it be so expensive? 

A common industry explanation is, well, New York is special. Land and financing costs are higher. Moving materials and manpower onto the busy, urbanized island of Manhattan especially jacks up costs. And the marquee buildings there remain more customized, complicated and costly. A 2023 analysis of skyscraper building speed, a big factor in construction costs, by Construction Physics found that New York’s building pace had dramatically slowed since the 1970s. 

“New York is an expensive city to do work in, but the return on your investment is incredible,” said Carlo Scissura, president and CEO of trade group the New York Building Congress. “It may cost you a little bit more, but you know that you’re getting quality materials, safe worksites and quality work.”

The other stock response has been highlighting the high cost of labor, and the political clout of New York City’s powerful trade unions. It is true that labor costs do play a significant role, and the city is an outlier when it comes to U.S. unionization rates. According to City University of New York data, the unionization rate of the New York metro area’s construction industry, 24.7 percent, is close to double the nationwide rate of 13.7 percent. Hourly wages for the industry also remain elevated: $39.44 on average vs. $30.73 nationwide, per a May 2024 federal Bureau of Labor Statistics survey.

But the impact of labor and organized labor in particular on New York construction costs isn’t quite that simple, and far from the only unique policy, circumstance or market force making New York construction a high-end investment. 

Start with that customization and the complication of building in the city. 

“When you look at the projects we’re lucky enough to work on here, the trophy Class A office buildings for blue-chip clients, the standards just keep getting higher and higher,” said Mike Hardman, Turner & Townsend’s New York vice president. 

Yildiray Yildirim, a professor of real estate finance at CUNY Baruch College, believes there isn’t any cost relief coming anytime soon.

“Labor shortages are a key driver, but they aren’t the only challenge,” he said. “Material prices remain volatile, permitting and regulatory processes are complex and slow, and many NYC projects are built to premium standards that push costs higher. Without major reforms in workforce training, permitting, and construction methods, meaningful cost relief is unlikely anytime soon.”

Make no mistake: Labor’s contribution to costs remains significant. The standards, though, come into play here, too. Not only does the city have a higher cost of living, and a workforce that tends to have longer commutes, but it also boasts prevailing wage policies that mandate higher pay on publicly underwritten projects and strong union agreements, as well as sustainability mandates like Local Law 97, which create a demand for more specialized — read: expensive — tradespeople. 

“We are paying our laborers good salaries, and it’s a good place to work,” said Scissura. “Every city should be paying a good, living wage.”

Unions have had a foothold in New York City construction for nearly 150 years, said Joshua Freeman, a labor history professor at Queens College. Union power, however, has declined across cities and industries in the U.S. over the last half century, including New York. 

There have been nonunion high-rises built here in recent years, something Freeman said would have been “unthinkable” decades ago. Nonunion share of work did outpace unions starting in 2009. The introduction of hazardous material abatement in the 1970s and 1980s created an opening for nonunion work to infiltrate the trades. Then a surge in construction demand in the 1990s helped nonunion shops grow. Finally, the Global Financial Crisis in 2008 pushed developers to turn to less costly construction options. 

But the city’s unions remain entrenched with significant bargaining power. In 2011, New York construction workers still earned significantly more than peers across the country. With a constellation of dozens of unions on job sites, managers need to coordinate rules, breaks and start times among numerous tradespeople. And workers can wield more power, in the form of political lobbying, as well as strikes and work stoppages. In 2011, union concrete workers staged a stoppage to protest proposed wage cuts. These actions have become more rare, said Yildirim, but can still add to the bottom line. 

“Every day that a construction loan is collecting interest before the building is completed is a killer,” said Freeman. “A strike or a slowdown or disruption by a relatively small group who have crucial skills can be massively expensive.”

Recent policy changes have reinforced these high labor costs. In 2020, the city expanded prevailing wage requirements to certain private developments receiving public subsidies, a particularly big deal in a city with so much government-
supported work such as affordable housing. And, last November, Mayor Eric Adams announced an expansion of project labor agreements, or PLAs, that institutionalize higher labor costs. City agencies like the New York City Housing Authority and the School Construction Authority regularly encourage or require PLAs.

And don’t forget the graying of this well-compensated workforce. A large portion of the skilled local workforce is aging out, said Yildirim. Over one-third of workers are 50 and older, while just 6 percent are under 25, per New York Building Congress stats. Immigration, a key source of skilled labor, is becoming more and more constrained with the current federal administration’s more aggressive immigration enforcement policies. 

It would be simplistic to put the problem of construction cost inflation on workers alone, though. The city’s permitting and zoning does drive costs higher by delaying many projects, said Hardman. Even regulations on when workers can work and the need for sidewalk sheds, in addition to often politicized land reviews by city agencies, produces unique bottlenecks not faced to the same degree in other global urban centers, he said.  

New York City also has much more complicated building codes when it comes to things like plumbing and electrical work, said Stephen Smith, executive director of the Center for Building, a think tank focused on building code reform. Industry players have pushed for more onerous building requirements, in part to provide more guaranteed work for skilled tradesworkers, which increases construction costs.

The city also has rules that limit the use of tower cranes, a much more common sight on construction worksites across other large cities, in favor of mobile cranes and even having workers haul goods up stairways by hand. This distortion of the crane market, caused by excessive licensing requirements and high insurance costs, creates a significant drain on resources and time. 

In addition, the city’s workplace safety laws also add significantly higher insurance costs to construction. The Scaffold Law, which mandates certain on-site protective actions, also allows injured workers to sue beyond the bounds of workers compensation. Some analysts have suggested that it has doubled the insurance costs of building in the city — from 5 percent of a project’s final cost to 10 percent — through higher premiums and a stunted insurance carrier market. 

That wicked combination of permitting and regulatory hurdles, an expensive workforce, code challenges, and a focus on high-end buildings likely won’t change anytime soon. Take the under construction J. P. Morgan Chase headquarters at 270 Park Avenue, an all-electric, top-of-the-line corporate office brimming with customized features, sustainability investments, and a $3 billion (and counting) price tag. It likely exceeds the city’s already sky-high average cost per square foot. 

Builders can try to be more efficient, and utilize technology to speed up construction processes or utilize high-tech procurement methodologies. But the fact remains that breaking ground in New York City can often drive developers to feel like they’re breaking the bank.

Construction costs have already risen 5 percent in July, and 2 percent over the course of the year, said Scissura, and until there’s stability and clarity out of Washington, D.C., in terms of tariffs and other trade policy, things will continue to be rocky. Turner & Townsend’s Hardman said he doesn’t see labor costs dropping anytime soon. “I only see them going one way.”

“It’s not necessarily a badge of honor that it’s the most expensive city to build in the world,” said Hardman. “It can kind of inhibit some growth.”