Those that were saying that this site won’t sit empty for years should not be so confident. My fears seem to be coming true, I fear. A nice building is coming down and a prominent lot will likely sit empty for years, smh. Vornado completely sucks in this district. Some empty lots owned by them like 34th and 8th ave are coming up on a decade (in a couple years) with no action.
They don’t specifically mention Penn 15, but the writing’s on the wall.
Developer Delays Penn Station Project, Citing Economic Conditions
Steven Roth, the CEO of Vornado, said that new construction was “almost impossible” because of tight lending, while remote work was hurting the office market.
NYTimes
Excerpts:
Vornado Realty Trust, the developer hoping to remake the skyline around Pennsylvania Station with a bundle of new office towers, has put the brakes on the massive redevelopment plan for now as interest rates remain high and the real estate market struggles to recover from the pandemic.
Steven Roth, the firm’s chief executive, voiced strong reservations about the short-term future of Penn Station development and other projects during a call with analysts on Tuesday, calling the prospect of new construction “almost impossible” because of tight lending.
Plans for the Penn site, a roughly 18 million-square-foot project that could include 10 new skyscrapers of mostly office space around the transit hub,
could be delayed for at least two to three years, Michael Franco, the firm’s president and chief financial officer, said on the call. Vornado is the largest landowner in the area.
Empire State Development, the agency that is steering the project, said in a statement that it is sticking with the plan, which, in addition to the office component, could also bring 1,800 new apartments, a portion of which would be rented below market rate.
“Quarterly conditions may fluctuate, but Governor Hochul’s commitment to revitalizing Penn Station and the area surrounding it will not,” the statement said.
Mr. Roth first cast doubts on the plans in November, when he cited challenges in the new-development market without directly referring to the future of the project. In January, the company announced a nearly 30 percent cut in its quarterly dividend and was removed from the S&P 500.
“I’d say it’s dead for now,” John P. Kim, a managing director at BMO Capital Markets, said about the plan, which is also slated to include some retail and hotel space.
The latest back pedaling could create an opening for critics of the redevelopment, who are hoping the state will be receptive to plans that put more focus on the much maligned Penn Station transit hub beneath Madison Square Garden.
“The improvement of Penn Station should not be beholden to a business cycle,” said Alexandros Washburn, the former chief urban designer at the Department of City Planning and director of the Grand Penn Community Alliance, a group that supports a full overhaul of the train station....
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A spokesman for Vornado did not address whether the company would rethink the mix in the broader Penn site, but said that work continues at Penn 1 and Penn 2, two office towers in the district that are in the process of being upgraded.
The company said it is still committed in the long run to the project. “We fully support the state’s general project plan for the Penn District, are making very significant investments in our existing buildings and are leading public private partnerships to enhance this vital transit hub,” the company said in a statement.
Like its competitors, Vornado is facing challenges because of rising interest rates and an office market that remains staggered by the growth of remote work.
In the first week of February, office occupancy was under 49 percent of prepandemic levels, according to Kastle Systems, a security-card company that tracks office building activity.
Mr. Roth has already conceded the five-day workweek. “I think you can assume that Friday is dead forever,” he said on the earnings call. “Monday is touch and go.”
Victor Calanog, the head of commercial real estate economics at Moody’s Analytics, said he was not surprised by Vornado’s decision.
“Is the best use of this space still office space, or do they need to pivot to some mixed-use component?” Mr. Calanog asked, noting that few lenders are willing to finance projects that do not have office tenant commitments.
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