https://therealdeal.com/2020/06/09/c...gh-a-pandemic/
City planning through a pandemic
How the response to Covid-19 could redefine NYC neighborhoods and shape land use decisions in the future
TRD New York
June 09, 2020
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Floor by floor, construction workers are dismantling JPMorgan’s 52-story office tower at 270 Park Avenue. And while their work represents the largest intentional demolition in New York City’s history, it has come to signify much more than that.
City officials have hailed the replacement of the more than 60-year-old tower with a new glass and steel headquarters for the banking giant as the culmination of years-long planning. And preservationists have condemned it as the wasteful destruction of a recently renovated building.
Now, in the wake of a devastating pandemic, the former Union Carbide building is also a symbol of mounting uncertainty.
The spread of coronavirus has pushed companies, including Twitter and Facebook, to rethink their physical office footprints and consider letting employees work remotely long-term. JPMorgan has even floated having employees rotate working from home after the pandemic subsides.
At the same time, the bank is moving forward with its plans to build a new 2.5 million- square-foot headquarters on Park Avenue, which is more than 1 million square feet larger than its existing tower and is intended to accommodate up to 15,000 employees.
And the massive project is part of an even larger goal: The surrounding neighborhood was rezoned in 2017 with the explicit aim to create 6.5 million square feet of new class A office space over the next two decades.
“Way back when, I thought Midtown East was a great model,” said Peg Breen, president of the Landmarks Conservancy. “[Now] I think of 270 Park, and JPMorgan Chase tearing down that building for something even larger, when a lot of their people are going to be working from home.”
Several monumental events of the past three months — from the global health crisis and strict shutdown orders to forecasts of a long-term economic fallout — have raised questions about the future of office markets across the country.
Of course, landlords, developers and their brokers remain optimistic that tenants’ retreat from physical office space will be short-lived, that the lure of company culture and visible brand identity will ultimately win out.
But the pandemic, which underscores the innate risk in relying on specific asset classes and tenant types to transform a neighborhood, could reshape how cities work to encourage new development in the future.
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“This is a situation where we can’t afford the regulations to lag behind the market,” said Mitch Korbey, who chairs the law firm Herrick Feinstein’s land use and zoning group.“We need to be sure that as we come out of this crisis, we’re aggressive and creative.”
On paper, the rezoning of Midtown East could be seen as disastrous — if read solely in the context of the pandemic. The zoning change banked on demand for massive new office towers, with proximity to Grand Central Terminal serving as a main selling point.
But some believe the ongoing spread of coronavirus, which has started to subside in recent weeks, will have few long-term impacts on development in the district.
“The goals of the rezoning are still spot on,” said Dan Garodnick, the former New York City Council member who shepherded the district’s rezoning through the land use review process.
“People are social animals, and I expect there will still be demand for commercial space. But perhaps with slightly different design parameters to accommodate the moment.”
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The rezoning incentivized tearing down the neighborhood’s aging office stock, while also requiring improvements to nearby infrastructure and the creation of more public space. The city projected that the creation of 6.5 million square feet of new office stock would take two decades to come to fruition.
That timeline could play in the neighborhood’s favor.
Former Department of City Planning chief Carl Weisbrod said New York’s office market may be in a fluid state for the next year to year-and-a-half. “In the short run, there’s going to be a hiccup for sure,” he said.
But Weisbrod, who’s now a senior advisor at the real estate and economic development consulting firm HR&A, added that the city has historically recovered from crises “surprisingly well and in new directions that we haven’t anticipated.”
He said he also thinks Midtown East is especially well positioned. Within less than a year of the rezoning, JPMorgan announced that it would tear down its headquarters. The bank received approval in late May to demolish down to the 41st floor of the building, according to the DOB.
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At least three other massive office projects, including developer Harry Macklowe’s planned 1,556-foot-tall skyscraper at 5 East 51st Street, have been announced since. Macklowe didn’t return requests for comment on the project.
RXR Realty, which is planning a $3 billion office tower near Grand Central with TF Cornerstone and MSD Capital, has continued discussions that started before the pandemic with tenants in the technology and finance sectors who are interested in anchoring the property, CEO Scott Rechler said. The project isn’t expected to be delivered until 2026.
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Still, until there’s a vaccine for Covid-19, many employees will continue to avoid mass transit and employers may not be eager to upgrade to larger spaces when they can only operate at 50 percent capacity.
In the short term, as construction sites begin to reopen, owners of projects that haven’t started or were early stages of development will have to carefully consider if and when they can restart work, said Linda Foggie, senior vice president and head of Turner & Townsends’ New York office.
But longer-term, the crisis could change how developers and planners think about density. Tenants will likely need more office space per employee, reversing the trend of cramming workers per every 125 square foot, Rechler said. For larger, well-funded companies that could mean a bigger footprint, with some employees working remotely. For less-established businesses, it could translate to a smaller workforce.
More than ever, planners should be thinking about how to build out other regions with access to mass transit, Rechler said.
“We need to densify where density belongs,” he said. “Sprawling is not the outcome you want to have.”
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Long Island City and Downtown Brooklyn were rezoned to spur commercial development, but instead resulted in condo towers that far outnumbered new office space. Midtown East already has the built-in infrastructure and surrounding residential communities to accommodate office growth, Weisbrod noted.
“Could growth be delayed somewhat because of what has happened over the past three months? Yes, I think that’s a real possibility,” he said. “But I think the fundamentals are very strong.”
Mary Ann Tighe, CEO of CBRE’s New York tri-state region, said she doesn’t believe there’s any danger of office development in Midtown East outpacing demand. She argued that tenants will likely favor new office buildings post-Covid due, in part, to large open floor-plates and better air quality.
But the pandemic highlights the rezoning’s singular focus on office use. Tighe said air rights in the district should be made available for some residential space.
“I feel even more strongly that that is a flaw in the Midtown East rezoning, and it’s one we should revisit,” she said. “Midtown East should adopt the goal of creating a truly mixed-use neighborhood.”
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.....“I think people will work differently,” Rechler said. “This becomes more likely a scenario where people know that they can use technology.”
Ultimately, though, he and others believe most professionals will still want some face time in the office, giving companies a reason to keep their space. Recent leasing activity also shows promise for the office market once the pandemic subsides.
Late last month, TikTok committed to taking more than 230,000 square feet in the Durst Organization’s One Five One tower in Times Square. Facebook also still seems poised to lease 740,000 square feet at the renovated Farley Post Office. Downtown Alliance President Jessica Lappin said she was encouraged by the news that Uber affirmed last month that it still planned to move into 3 World Trade Center, despite company layoffs and office closures throughout the country.
“I don’t think people will want to work permanently from home,” she said. “Setting aside productivity, it’s hard to build culture, it’s hard to build teams if no one meets in person.”
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NEW YORK is Back!
“Office buildings are our factories – whether for tech, creative or traditional industries we must continue to grow our modern factories to create new jobs,” said United States Senator Chuck Schumer.
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