(Bloomberg) -- New York City has for decades talked about improving the neighborhood around antiquated Pennsylvania Station with the kind of development that’s invigorated other parts of Manhattan. Real estate billionaire Steven Roth is finally seizing the moment.
Roth’s Vornado Realty Trust is determined to replicate Hudson Yards’s success and lure tech companies to make the “Penn District” the next hot part of town. The company is spending more than $2 billion to redevelop over 5 million square feet near the station and Madison Square Garden, the sports arena that sits atop the depot.
Now Vornado is reportedly luring Apple Inc. and Facebook Inc. to be tenants at the project, which will be the capstone of the septuagenarian chief executive officer’s career. That’s despite near-universal disdain for the transit hub and the lack of action on replacing the century-old rail tunnels that feed it.
The destruction more than 50 years ago of the old, majestic Penn Station in favor of a subterranean warren with low ceilings and rathole train platforms, to accommodate the home of the perennially disappointing New York Knicks, cast a pall on the area. Today it’s ringed by panhandlers, drug abusers, bland bank branches, nondescript pharmacies and steady streams of travelers -- an estimated 650,000 a day -- who make the station the busiest transit center in the Western Hemisphere.
Rehabilitation of the area has been a non-starter in the past because developers seemed to be looking at one another and the state government to determine who would break ground first, said Paul Amrich, vice chairman of real estate firm CBRE Group Inc.
“With the strength of the economy and the war for jobs and talent, it feels like this is probably the time that that part of town finally gets transformed,” Amrich said.
Vornado’s plan includes several buildings within a block of Penn Station. At Penn 1, across 33rd Street from the station, the company is in talks with Industrious, a WeWork competitor, to manage nearly 100,000 square feet of office space, according to a person familiar with the matter.
Penn 2, at the station’s main entrance, will get a new facade, lobby and a rooftop terrace. Apple is reportedly in talks with Vornado to lease space across the street at Penn 11. If all goes well, Vornado said its next project will be revamping Hotel Pennsylvania on Seventh Avenue.
Vornado’s negotiations with Facebook and Apple were originally reported by the New York Post.
Across Eighth Avenue, the James A. Farley Post Office Building would include offices and a new concourse, thanks to a Vornado joint venture with state government, transportation organizations and rival developer Related Cos. It’s slated to open by the end of the year and is expected to lighten overcrowding at Penn Station by 50%. That’s in addition to the west-end concourse that opened in 2017.
“After decades of idle talk without any real action, we are once again investing in large public projects to support a stronger economy,” Cuomo said in a statement last month. “This will improve how more than half a million New Yorkers commute, travel and work every day, while transforming Penn into the world-class facility the Empire State deserves.”
Vornado didn’t respond to requests for comment. In an October conference call, Michael Franco, the company’s president, called the development Vornado’s “big growth engine.”
“Our goal simply is to make the Penn District, and our holding specifically, the go-to location for tenants in the city,” Franco said.
Part of the draw is proximity to the transportation nerve center. From Penn Station, Amtrak provides service nationwide, most notably on its Northeast Corridor to Washington and Boston. The Long Island Rail Road and New Jersey Transit shuttle commuters. Six subway lines, run by the Metropolitan Transportation Authority, stop in Penn Station and others are within a block.
But the selling point may also be a hurdle. Many travelers are frustrated by an often unreliable subway system and the shortage of tracks heading west, under the Hudson River, to New Jersey.
“The trains are always late,” said Christina Doyle, a 23-year-old commuter.
Desperately needed upgrades to expand the inadequate and aging trans-Hudson tunnels remain in limbo. A fully funded $8.7 billion project was all set to start in 2010 when New Jersey Governor Chris Christie quashed it. Without support from the Trump administration, subsequent funding plans for the so-called Gateway project have languished.
Benjamin Bolden, a 32-year-old New Jersey commuter, said he’s skeptical the Penn District will ever be a place where people want to set up shop.
“I wouldn’t want to work right here,” he said. “There’s congestion all the time. There’s just too much going on.”
Vornado is pushing ahead, no doubt with an eye on the ascendancy of competing business districts.
Chelsea, just blocks away, is home to Google. The $25 billion mixed-use Hudson Yards project on Manhattan’s far west side attracted Facebook, Wells Fargo & Co. and KKR & Co. In December, Amazon.com Inc. signed its first major lease in the area, after abandoning plans for a “second headquarters” in Long Island City. And Manhattan’s other rail hub, Grand Central Terminal, remains an icon that’s flanked by offices.
“Anybody that moves in and out of a major station in New York City” and has a choice between the two, CBRE’s Amrich said, “would pick Grand Central hands down.”
--With assistance from Jeremy Cf Lin.
To contact the author of this story:
Natalie Wong in New York at [email protected]
To contact the editor responsible for this story:
Craig Giammona at [email protected]
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