UPDATED, Feb. 17, 11:32 a.m.: As part of its mission to revamp its Penn Plaza portfolio, Vornado Realty Trust plans to combine its One and Two Penn Plaza office buildings into a 4-million-plus square foot complex.
“The goal here is to achieve market rents as much as 50 percent higher as market rents,” CEO Steven Roth said on the company’s earnings call Wednesday morning.
Vornado owns some 9 million square feet of office and retail properties surrounding Penn Station, and as the city’s office market has shifted west with projects like Hudson Yards and Manhattan West, the mega REIT sees a high-payoff opportunity in investing in the area.
Roth said combining the buildings would give the landlord more leeway to move tenants around, and add amenities like new food outlets.
“We can afford to put an amenity complex into those 4-plus-million-square-feet buildings that are not economic even in a half-a million or a million” square foot building, Roth said. As the company looks to attract TAMI tenants, he added, Vornado is looking to replicate much of what the “tech industry is doing on their big, huge campuses.”
The two buildings are separated by 33rd Street, a portion of which the city’s Department of Transportation shut down over the summer as a test-run for a public plaza.
The 1.6 million-square-foot Two Penn Plaza, located above Penn Station, is leased to McGraw-Hill and the Dolan family’s Madison Square Garden Company. Roth said the plan is to “re-skin” the building, replacing the punched windows with ones that will stretch nearly from floor to ceiling, making the building “look like it was built recently.”
The CEO said plans for the 2.7-million-square-foot One Penn Plaza would resemble a more conventional upgrade. He said it was premature to put a price on the renovations.
Market rents in the area average $55 per square foot, and Vornado has reportedly completed deals at $60 per square foot recently.
The company is spending hundreds of millions of dollars to upgrade buildings like 7 West 34th Street and 330 West 34th Street, and has hinted at more to come as projects such as Governor Andrew Cuomo’s goal to jumpstart a new Penn Station hit the pipeline.