Hey, remember back this summer when there was speculation that Madison Square Garden could be torn down and rebuilt in Manhattan’s Hudson Yards complex to make way for a sea of new office buildings around Penn Station (and maybe a rebuilt Penn Station too)? Welp, the prime developer behind the Penn Station redevelopment plan just announced that, uh, nope, not gonna be doing that:
Vornado Realty Trust said it won’t be erecting towers around Penn Station any time soon and will cut its dividend early next year to conserve cash.
“The headwinds in the current environment are not at all conducive to…development,” Chief Executive Steven Roth said on a conference call Tuesday.
Asked if he might revise his ambitious plans for redeveloping the area around Penn Station, perhaps by constructing more apartments and fewer offices, Roth said, “That’s not something we’re going to get into now.”
Yow! On the one hand, Roth’s announcement makes total sense: The office building market is in a tailspin, thanks to both the growth of remote work and rising interest rates for construction, which is the whole reason MSG-to-Hudson Yards wasn’t an entirely crazy idea. (Hudson Yards builder Related still has a large plot of railyards it has yet to develop with office buildings, and is in no hurry to do so because see above re: too damn many office buildings already.) On the other hand, this Penn Station redevelopment has been a huge deal both for Vornado and for New York Gov. Kathy Hochul for years now, and for Vornado to abruptly pull the plug is, well, abrupt.
There’ll likely be plenty of speculation about what this will mean for Hochul’s reelection campaign, but I’m more interested in what this will mean for the state of the “mixed-use developments” that have become part of many, many sports venue plans. If building a bunch of commercial towers around your stadium becomes more costly and less lucrative, suddenly it makes a lot less sense to, say, pay to build a stadium so long as you get $1 billion in infrastructure spending to make the rest of your development more profitable.
The reasonable response to this from city officials would be “Oh well, guess if there’s no market for commercial buildings then don’t build commercial buildings”; the expected response is more likely to be along the lines of “Oh no, we can’t get stadiums built by subsidizing profitable commercial real estate deals, we better figure out some other way of subsidizing them instead!” I mean, maybe I’m wrong and local electeds will exceed my expectations, but I’ve been betting the under on them for more than 25 years now, and haven’t gone wrong yet.
There’s also the ongoing lawsuit against the ESD questioning whether the whole deal with Vornado violated planning and environmental laws.
It’s one thing for Vornado to say it’s not developing, but more importantly if they lose the rights to develop.
Vornado’s come a long way since Two Guys.
Arghhh…that Crain’s article is behind a paywall. Sorry, Crain’s, but I am not going to subscribe for the one or two articles a year I would like to read.
https://addons.mozilla.org/en-US/firefox/addon/bypass-paywalls-clean/
Very cool! Thanks for that, Neil, it’s one I wasn’t aware of, and they have a version I can use on Edge.
It doesn’t work for everything — sometimes I still need to resort to the paste-the-URL-into-Instapaper trick — but it does 90% of the time.
Thanks Neil. I’ll give that a try.
Can anyone explain why the NY Times hasn’t reported this story yet?
People might not want to work in offices in big cities, but they still want to live in them.
We need more apartment buildings. And not just condos that rich people buy to park/launder money.
That’s weird. They covered this story before. Maybe their reporter is just out this week.
https://www.nytimes.com/topic/company/vornado-realty-trust