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NYC developer fears ‘office apocalypse,’ may put up tennis courts on leveled Hotel Pennsylvania site

The developer that demolished the landmark hotel across from Madison Square Garden has abandoned plans for a shiny new skyscraper, with interim use of recreational space that could include tennis and basketball courts. could be built – a sign of an “office apocalypse” in the commercial real estate market.

Vornado Realty Trust originally planned to build a 56-story, 2.7 million-square-foot office tower on the site of the former Hotel Pennsylvania at 15 Penn Plaza. A 100-year-old building in the central business district (CBD) near Penn Station was demolished last year.

However, in the post-coronavirus era of hybrid work, demand for commercial office space is slow to recover, and financing options are limited due to high interest rates.

“The CBD office apocalypse is here, with the threat of working from home and the full blacklisting of offices in the capital markets,” Vornado CEO Stephen Ross said on an earnings call earlier this week. told investors.

Vornado Realty Trust is considering a plan to build a U.S. Open tennis court in midtown Manhattan. Vornado Realty Trust

Vornado A pamphlet has been published Renderings show the site on Seventh Avenue between West 32nd and 33rd Streets being transformed into an 80,000-square-foot pavilion. The area could be used to house a temporary tennis court for a potential U.S. Open match, a basketball court in the shadow of the Knicks’ home, a Fashion Week tent, and a 10-story digital billboard. The image shows that this is true.

The company said the renderings were shared with city officials “for conceptual purposes.”

Vornado told Crain’s New YorkThe company first reported the news, saying it was considering “a number of potential interim options” for the site.

The Vornado is also considering converting land across from Madison Square Garden into a basketball court. Vornado Realty Trust
Vornado has released renderings showing possible alternatives to the now-demolished Hotel Pennsylvania site. Vornado Realty Trust

The city of Vornado initially planned to build 18 million square feet of space around Penn Station, and state officials said tax revenue from rents and commercial activity in the area would help fund an overhaul of the congested transit hub. I was hoping it would be helpful.

But Ross said his company is putting plans on hold to build new office and residential towers in the second half of 2022, citing soaring interest rates and a poor economic environment that is hampering the commercial real estate sector.

The Hotel Pennsylvania was demolished last year to make way for new development.

Vornado’s possible alternatives require state approval.

Empire State Development, which is tasked with approving large public projects under Gov. Kathy Hochul’s jurisdiction, could not be reached for comment.

Experts are warning of a liquidation in the commercial real estate market.

Although Manhattan’s office market bottomed out in 2023 with vacancy rates above 20%, the near-term future looks brighter, according to a recent report from national real estate technology platform VTS.

The Post previously reported that demand for space in the Big Apple will increase nearly 40% year over year in 2023, according to the latest Quarterly Office Demand Index (VODI), with demand rising to 75% of pre-pandemic levels.

Vornado is also considering using the site for events such as New York Fashion Week. Vornado Realty Trust

Still, about $1.2 trillion in commercial mortgages are scheduled to mature this year and next, according to Goldman Sachs.

The Hotel Pennsylvania, a 100-year-old building, was demolished last year as part of a new redevelopment of Penn Plaza. Getty Images

This represents nearly a quarter of all commercial mortgages outstanding and is the highest level since 2008. The largest single holder is a bank with a 40% share.

Other estimates put the “maturity wall” at $1.5 trillion.

Analysts predict a steady decline in the number of borrowers refinancing their mortgages at significantly higher interest rates over the next few years, potentially leaving buildings vacant and property values ​​falling.

with post wire

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