https://www.bizjournals.com/newyork/...-mcmillan.html
Developers planning Midtown skyscraper bet on recovery of NYC's office, hotel markets
By Liz Young
Jun 2, 2021
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As New York begins recovering from the Covid-19 pandemic, two developers are working on a massive plan to build a skyscraper in Midtown. They see their project as a vote of confidence in the city's future.
RXR Realty and TF Cornerstone plan to demolish the Grand Hyatt Hotel next to Grand Central Terminal, and in its place, build a huge tower of up to 83 stories with offices, a hotel and retail space. The project would take advantage of the recent East Midtown rezoning to increase density, while adding public space and transportation infrastructure improvements.
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The new building would likely open in 2030, the developers have said. They're calling the project 175 Park Ave.
Jon McMillan, director of planning and senior vice president of TF Cornerstone, said his company likes to take risks, and while that's not exactly what's happening here, he sees this as an adventurous undertaking.
"We want to be the first to surge forward in these troubled times, because we do have the belief in the future and we have this track record in being successful in doing that by being just a little bit ahead of everyone else," McMillan told me. "It's in our DNA at TFC, so we're going to do it this time around and hope for the best."
McMillan said he's already witnessing the city coming back to life, with the weather warming up and the Covid-19 vaccination rate increasing, as tourists return and residents begin getting out and about again. But that's not the only reason he's confident in the investment TF Cornerstone, and RXR Realty, are making with 175 Park Ave.
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"No matter what happens, there's always going to be companies and offices in New York, and there's always going to be a flight to quality. Corporations are always moving around. Their leases come up, they have to look for new office space, and they look for the best space available, and we're going to have the best space," McMillan said. "The vacancy is not going to be with the best office space. The vacancy is going to be with the worst office space."
The skyscraper would include 2.1 million square feet of Class A office space. Even while most workers haven't yet returned to their Manhattan offices — office buildings have recently hovered around 16% occupancy, according to analyses by Kastle Systems — McMillan said he sees reasons for optimism.
"I'm hearing all the time that people are returning to their offices, and I'm even hearing people say, 'We're only going to hire firms that have returned to their offices,'" he said. "So you're about to hire a lawyer, and one firm, everyone's in the office in Midtown, and the other firm, everyone's lying at home in their pajamas … I think it's going to come down to competition between firms."
This massive project, still in its planning stages, could be another bellwether for the city's recovery, he said.
"It's sort of a sign of hopefulness for the town, I think, and I think we've received a lot of support for that reason," McMillan said. "People are rooting for us because it's a real symbol of confidence in New York's future."
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TF Cornerstone and RXR Realty are entering the city's approvals process, called the Uniform Land Use Review Procedure, or ULURP, and forging ahead with the project at a time when Manhattan's office availability rate is at a record-high 17.1%, according to a Colliers report.
A Colliers researcher has said that's not solely because of the pandemic — it's also because of additional supply coming onto the market from new construction and vacant space left behind as various tenants relocate to Hudson Yards and other new developments.
By the time 175 Park Ave. would open, McMillan said he believes New York's office market will again be shifting, this time back toward Midtown.
"I think Hudson Yards will play out, and downtown, the World Trade Center will eventually fill up, but who knows, by the time this building opens, those leases may be up and those companies may want to come back [to Midtown]," McMillan said. "There's no question companies will prefer our location to those locations."
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The skyscraper would also include a 453,000-square-foot, Hyatt-operated hotel of up to 500 rooms. Similar to the office market, the hotel sector in New York has been greatly affected by the pandemic as tourists stayed home and would-be business travelers turned to Zoom.
Again, McMillan pointed to the project's timing — 175 Park Ave. will be entering the market at a very different time than the one we're in now.
"This is eight years from now, and we think the hotel industry will be fully recovered by then," he said. "It's just about differentiation and product and this will obviously be a distinct product in New York."
Already the hospitality industry is showing signs of recovering. The average occupancy rate for New York hotels that are open has been steadily increasing over the past three months, up to more than 58% for the week of May 22, according to STR, a global hospitality data and analytics company.
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Hyatt plans to occupy the upper floors of the skyscraper. McMillan said he anticipates there will be amenities that focus on that combination of hotel and office space inside.
"We will find ways that one complements the other," he said. "[For example], your office is on the 40th floor. You get on the elevator, you go up to the top of the building, and there's a great restaurant. Not a lot of office buildings have that, so we think there are a lot of synergies between the two uses."
TF Cornerstone at one point considered including residential use as part of the project, but McMillan said it got too complicated. Instead, he expects the building's setbacks, which will create different size floor plates throughout that part of the tower, will make the office space appealing to a variety of companies in a wide range of industries.
"We're trying to create a building that should satisfy the entire universe of the office market," he said.
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The project will include elevated terraces spanning 25,000 square feet total that will be accessible to the public. TF Cornerstone and RXR Realty last week brought on the Public Art Fund and Lord Cultural Resources as partners to bring arts and cultural programming to those public spaces, with planning still in the early stages.
Public Art Fund, a New York City nonprofit that recently worked on the new Moynihan Train Hall, will find artists to work on the project. McMillan said the art could include discreet sculptures, the artists getting involved in creating the space itself, or constantly changing displays.
Lord Cultural Resources, an international consulting organization that has offices in New York, will work on the cultural programming piece, which McMillan said also could mean anything at this stage.
"Is it going to be exhibitions? Is it going to be performances? We really don't know yet, so they're going to help us size up our opportunities," McMillan said.
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So far, since entering ULURP last month, the developers have been receiving mostly positive feedback, McMillan said.
"We have really, really pleased with how well received the project has been, and we have been tweaking all along. It's not that people don't have criticisms," McMillan said. "[But] people have felt like they have input into the project, and it's gotten better because of that."
175 Park Ave. is currently in the community board review process, before moving before the borough president, then on to the City Planning Commission, and finally to the City Council and the mayor. McMillan said he expects those final steps will be reached in December, with the goal of completing ULURP before the de Blasio administration leaves office at the end of the year.
After that, the developers will turn to the entitlement process and start marketing the building. Demolition of the existing Grand Hyatt Hotel could begin as soon as the fourth quarter of 2022 to pave the way for construction of the tower.
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McMillan said his impression so far is that local community members see the need for a new tower like 175 Park Ave., situated next to a major commuter hub in the center of a core business district.
"The larger picture here is the revitalization of Midtown, and I think everyone acknowledges that Midtown has this aged office stock, and it's very hard for companies to move into these office buildings built in the 1960s and make these offices work," he said.
He added that the development team believes its timing is perfect, because the building's design will be able to evolve over the next few years as people learn more about best practices for office design in the post-pandemic era.
"We're trying very hard to meet the challenges of Covid as we all slowly figure out what they are and how to respond to them," McMillan said. "We're lucky in our timing, because we're positioned in our timing to be able to respond to all of this stuff as it evolves."
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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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