Despite Naysayers NY Forges Ahead with Penn Station Redevelopment Plan, Adds 10 Office Towers

By:  Hadassa Kalatizadeh

Despite the record high vacancy rates in Manhattan office buildings, New York officials are forging ahead with plans to add ten office towers as part of the Penn Station redevelopment plan.

As reported by the NY Times, the bold project is slated to be the biggest real estate development project in American history.  The plan, which has support from NYS Gov. Kathy Hochul, is moving ahead despite the ongoing trend for remote or hybrid work schedules for employees who still prefer to work from home.  Large companies including HSBC, JP Morgan, and Wells Fargo to name a few have been downsizing their office space.  The bid is a vote of confidence for the future of Manhattan’s commercial space, despite these uncertain times.

Notwithstanding, Ms. Hochul seems to be doubling down on her support for the project which if successful could become her legacy. She is betting that white-collar workers will eventually return to Midtown en masse, and that firms will scoop up top-tier office space at high demand within the next two decades.  The state has bent the rules, changing zoning rules to allow Vornado Realty Trust to develop taller, larger towers than would usually be permitted.

The plan is to have revenue at the ten planned towers help pay for the renovations at Penn Station, which is the busiest transportation hub in the United States.  The station’s project cost is about $7 billion, with a slated completion date of 2027.  “We need a Penn Station that has more capacity, that’s more unified and that is safer and able to serve the region like Grand Central,” said Brian Fritsch, the communications director at Regional Plan Association, a research group.

The towers planned can take up to 20 years for completion—with completion dates as far as 2044.  The construction will necessitate the demolition of several properties across 30th and 34th Streets, including tearing down a 150-year-old Roman Catholic church.  While the dimensions haven’t been finalized, the towers would encompass about 18 million square feet of new space—some 75 percent of which would be offices, while the rest would include ground-level storefronts, up to 1,800 residential units and a 472-room hotel, as per the NY Times. The towers would have new entrances to the transit station.

Critics, however, say the plan will turn into another Hudson Yards—shiny tall buildings with high vacancy rates– which currently hover at around 37 percent.  “Tenants move from building to building, and if there is insufficient growth due to the remote-work phenomenon, which is here to stay, there will be landlords who are left with empty offices,” said Ruth Colp-Haber, a commercial real estate broker. The opponents also point to the tax breaks the single developer would receive, saying it is a means for one company to benefit richly.

“Given what has happened to the commercial market, it’s not going to be a source of revenue for a long time until the market turns around,” said Richard Ravitch, a former NYS lieutenant governor who was the M.T.A. chairman in the early 1980s. “Where we get the money for Penn Station should be a separate question.”