Wall Street Journal
January 21, 2013
By Laura Kusisto
As developers plan to break ground this week on the second phase of the City Point development in downtown Brooklyn, the long-anticipated project has become a flashpoint in a simmering battle over the use of nonunion construction labor.
Developers said construction work on City’s Point’s 670,000 square feet of retail space portion will be at least partially nonunion, and at least some of the space for about 700 apartment units likely will be as well. The 1.8 million square-foot project is being built with affordable-housing subsidies on city-owned land on the site of the former Dekalb Market and is among the largest developments in Brooklyn since the recession.
The three-part project’s first phase was also nonunion and was the site of periodic protests, but the labor situation for the larger second phase underscores how the city’s powerful construction unions are losing their grip on development projects.
The hard-hatted construction worker once symbolized the strength of the city’s labor movement, but now only about half of the industry’s jobs are unionized, said Richard Lambeck, chairman of the construction management program at the New York University Schack Institute of Real Estate. Just 15 years ago, Mr. Lambeck said, 80% to 90% of construction work in the city was union. A 2011 report by the Regional Planning Association said union labor has declined to 60% from 85% in the 1970s.
Paul Travis, of Washington Square Partners, which is developing City Point’s retail portion with Acadia Realty Trust, said City Point’s retail component would use a mix of union and nonunion labor to cut costs, get the project built faster and use more minority workers. The second phase will create about 3,780 construction jobs.
“We’re beginning to really have a good group of highly qualified competitive minority contractors,” said Mr. Travis. “If you looked at a job like this 10 years ago, the world has really changed.”
Construction of the second phase will begin with a huge retail space that will include Century 21 and a “market hall,” similar to the Ferry Building in San Francisco or Reading Terminal in Philadelphia, which will include local food vendors. The second phase also includes about 565 units of market-rate housing and 125 units of affordable housing.
The developers will use nonunion labor in part because it allows them to hire more local, minority and female laborers, Mr. Travis said, noting that on the first phase 41% of more than 180 construction workers were local and 82% were minorities.
“We’re pretty confident that in the next phase, we’ll be able to continue the hiring record that we have so we will become one of the largest employers of local workers in the neighborhood,” Mr. Travis said.
But union leaders have fired back that paying lower wages hurts local workers and could potentially lower the quality of construction.
“I don’t know why the city, the [Economic Development Corp.] and Acadia, how they think that that’s fair after they received all the taxpayer money that they have,” said Terry Moore, of Metallic Lathers and Reinforcing Ironworkers Local 46.
Some large developers in the city have used nonunion labor, including Equity Residential, Toll Brothers and El Ad Group.
Mr. Lambeck and other experts said developers are turning away from union labor because construction costs are rising more quickly than rents and condo prices and because nonunion workers are able to finish jobs more quickly than in the past. They said the successful completion of some jobs with nonunion labor has helped increase developers’ confidence. Nonunionized labor also costs roughly 30% less, they said. “Those [nonunion workers] are becoming more and more skilled,” Mr. Lambeck said.
City labor leaders said most big projects remain union jobs. “They’re almost all being built union, like Hudson Yards, Hunters Point South in Queens, the B2 Brooklyn project that Forest City Ratner is building near Barclays [Center],” said Paul Fernandes of the Building & Construction Trades Council.
To help hold on to these large jobs, unions have become more willing to compromise in the form of “project labor agreements,” which can include concessions on wages and benefits. “They’re going to make changes as they proceed because they’re seeing an erosion of their membership,” Mr. Lambeck said.