Many of our readers likely saw today’s excellent lead article in the New York Times discussing the new Penn Station development project which is being spearheaded by Governor Hochul. I was pleased to be quoted in the article (see the click through below).
The project provides for a group of developers led by Vornado Realty Trust to build 10 new office towers over two decades. The antiquated Penn Station would be renovated at an estimated cost of $7 billion to be completed in 2027. The developers would contribute a yet to be determined amount toward the renovation expenses in return for property tax relief for all the buildings which could total $1.2 billion.
This plan is obviously an audacious gamble at a time when remote work has developed a strong foothold and a majority of office employees have indicated support for at least partial work from home in many surveys. On the other hand, it is a long-term bet on the future of New York City and improvement of a major transit center when that kind of investment is desperately needed. I believe we are extremely fortunate that developers are willing to risk billions of dollars on a project that is a three-fer in that it will finally bring the third world caliber Penn Station up to modern standards, vastly improve the blighted surrounding neighborhood as well as provide badly needed economic development and jobs to the city.
Competition with Hudson Yards does not greatly concern me as we have generally been seeing a flight to quality from older Class B buildings so the two developments can coexist successfully. However, there will be a knock-on effect. As I was quoted in the article: “Tenants move from building to building, and if there was insufficient growth due to the remote-work phenomenon, which is here to stay, there will be landlords who are left with empty offices.” In other words, at the risk of oversimplification office leasing is a game of musical chairs, and the lesser buildings will fare poorly in comparison to the Class A buildings in the trend toward bifurcation that is well under way.
Doomsayers be damned, this is a risk worth taking. If anyone else has a plan to fix Penn Station and improve the neighborhood that is better than what is currently on offer I’m all ears. But in this case it is a hackneyed cliche to attack the big, bad developer when in this case the city and commuters will benefit tremendously from this exciting proposal. On the other hand, leaving the status quo in place means going backwards into further decay and delay. That is the truly unacceptable risk.
“Penn Station Plan Makes a High-Stakes Bet on the Future of Office Work”