No Office Towers for Penn Station Makeover

Penn Station redevelopment. Image courtesy of Office of Gov. Kathy Hochul

Plans for the redevelopment of New York City’s Penn Station have once again changed course. Governor Kathy Hochul announced in a press conference on Monday that the reconstruction of Penn Station is moving forward, without the additional development of office towers.

The decision follows a series of changes to the original plan that occurred over the last few years. The initial redevelopment of this New York City landmark was valued at $1.3 billion and included the addition of 10 buildings encompassing 20 million square feet of office, retail and hotel space, as well as residential buildings. The project was launched in a partnership with Vornado Realty Trust.

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In 2021, Gov. Hochul took over the plans from ex-Gov. Cuomo. Up until 2022, the project was set to include the office space, the redevelopment of the train station without the building of a new terminal, and the addition of 8 acres of public space. The state’s plans were to fund the redevelopment with the property tax revenue from the office properties.

In what ended up as a $22 billion redevelopment plan of the station and the area surrounding it, Vornado Realty Trust eventually announced in late 2022 that the company is putting the plans on hold due to the low demand for office space, high interest rates and unfavorable capital markets. Manhattan’s office development pipeline has in fact decreased since the beginning of the pandemic, with no new projects coming online in 2023 as of May, according to CommercialEdge data.

Current redevelopment plans

The actual redevelopment of the station is now valued at $7 billion and the New York state has already appropriated $1.3 billion for the reconstruction. Additional funding is expected to come from cost-sharing among the railroads and federal grant programs. Due to its inclusion on the Northeast Corridor Project Inventory priority list, the redevelopment is eligible for Federal-State Partnership funding via the Infrastructure Investment and Jobs Act.

The MTA issued a Notice to Proceed to start off preliminary design, which includes consultant WSPIFXC JV, as well as architect John McAslan.  Earlier this spring, Italian firm ASTM Group released a proposal for the Penn Station redevelopment that would be complete by the end of 2030, as reported by the Archinect News.

The Penn Station, which was commissioned by the Pennsylvania Railroad, initially opened in 1910 and was designed by architectural firm McKim, Mead & White. The railroad station was then demolished in 1963, a process completed by 1966. The building was then replaced by Madison Square Garden.