The Real Deal New York

Infrastructure City

A look at the public mega projects expected to boost the industry,
from LaGuardia to the ‘Dryline’

September 01, 2015
By Rich Bockmann

“Dryline” will stretch from East 23rd Street to just south of the Williamsburg Bridge. The barrier is part of a bigger project to protect Manhattan from future floods.

“Dryline” will stretch from East 23rd Street to just south of the Williamsburg Bridge. The barrier is part of a bigger project to protect Manhattan from future floods.

Gov. Andrew Cuomo checked off a big item on the city’s to-do list in late July, when he unveiled a $3.6 billion overhaul of LaGuardia Airport.

Yet revamping the much-maligned airport will barely make a dent in New York’s long line of big-ticket infrastructure demands, which range from a new Hudson River rail tunnel into Penn Station to a system to protect Lower Manhattan from flooding during future storms.

“The need [for infrastructure improvements] is clearly tremendous,” said Adam Forman, a senior researcher at the Manhattan-based public policy think tank Center for an Urban Future.

Improving and expanding city infrastructure has a direct impact on the real estate industry. “There’s a significant correlation,” said Stephen Sigmund, executive director of the Global Gateway Alliance, a non-profit founded by Thor Equities CEO Joe Sitt to advocate for investment in the region’s airports. “Development depends on the success of the city, such as with tourism and retail.”

Projects like the construction of the Second Avenue Subway and the extension of the No. 7 line to the Far West Side also boost property values by improving accessibility. And better transportation opens up new neighborhoods for development.

Those projects also create jobs and business for developers and construction firms, like Skanska USA, which won the contracts to build both subways and is part of the consortium that will overhaul LaGuardia.

The New York Building Congress, which represents the construction industry, said the number of construction jobs surged to more than 127,000 last year, a total behind only 2008 in the last two decades.

The Building Congress is expecting City Hall to increase infrastructure spending by 16 percent over the next four years. Last year, the city signed contracts committing $7.4 billion to capital projects, up from $5 billion a decade earlier, according to figures compiled by the Independent Budget Office. So there is serious money on the table.

This month, The Real Deal looked at some of the biggest planned projects or wish list projects in the works, and at what they mean for the real estate industry. Here’s a rundown.

LaGuardia Airport redesign

Cramped, crowded and unsightly, LaGuardia was infamously given a “Third World” rating last year by Vice President Joe Biden, who joined Cuomo in July when the governor announced the Port Authority’s plan to revamp and connect the airport’s three main terminals. The project is slated to take at least six years.

Currently, the airport contributes more than $16 billion annually to the region’s economy. And, it’s considered crucial to the city’s tourism business, which has a direct impact on retailers, hotels and the overall economy.

“Tourism and travel are a major part of the city’s economy, and it’s critically important that when visitors come into the city, the first impression they get is a positive one,” said Lou Colletti, president of the Building Trades Employers’ Association, the trade group for union contractor associations in the city. “That’s not the case with LaGuardia.”

The first phase of the revamp, which will break ground next year, is expected to cost $3.6 billion and open to passengers in 2019.

The Port Authority will first demolish the Terminal B building, which it owns, and replace it with a bigger, more modern structure closer to the Grand Central Parkway.

A team led by Skanska is building the project, which is expected to create 8,000 direct jobs.

Moving the terminal will free up valuable real estate for aircraft taxiways, which is expected to help alleviate the airport’s notorious delays.

Meanwhile, Delta Airlines will complete phase two of the upgrade. The airline will redevelop the two terminals it owns to the east of Terminal B and connect them to a newly created “central hall” by a series of sky bridges that will allow planes to taxi underneath. Overall, the redevelopment is expected to free up two miles of taxiway.

While the plan was largely lauded, it is not without detractors. Some have suggested the redesign is mostly cosmetic, and that the airport’s small size and short runways will continue to limit capacity.

In addition, LaGuardia still lacks a mass-transit link. Cuomo unveiled a proposal, which has an estimated cost of $450 million, in January to build an AirTrain-type link to the airport.

A rendering of the $3.6 billion overhaul of LaGuardia Airport. The first phase is set to break ground next year and open to passengers in 2019.

A rendering of the $3.6 billion overhaul of LaGuardia Airport. The first phase is set to break ground next year and open to passengers in 2019.

“The AirTrain to JFK has turned out to be an important transportation link for workers at the airport and for air travelers,” said Mitchell Moss, the director of the Rudin Center for Transportation at New York University.

Moss said LaGuardia, which sees more than 25 million travelers annually, also needs better access to public transit.

Gateway tunnel

You might call this one the little train that could — if the latest push to get this project moving again actually succeeds.

The fight to add a second train tunnel connecting New Jersey and Manhattan has been going on for several years to no avail, but momentum is picking up again.

Currently one tunnel (with two tubes) shuttles 188,000 New Jersey Transit and Amtrak passengers each weekday between New Jersey and Manhattan.

The half-mile-long, 100-year-old tunnel, which Amtrak owns, reached peak capacity in 2003.

And if that weren’t enough, the tubes were significantly damaged during Superstorm Sandy in 2012. The results? Headline-making delays that have maddened thousands of commuters.

Amtrak CEO Joe Boardman said last year that the tubes will have to be shut down within 20 years for repairs. Amtrak expects this would cut peak capacity from 24 trains an hour down to six.

The fight for an additional tunnel took a major blow in 2010 when New Jersey Gov. Chris Christie, citing potential cost overruns that put the price tag at $12 billion, pulled the plug on a planned New Jersey Transit tunnel into the city, known as Access to the Region’s Core or ARC.

Then in 2011, Amtrak proposed a new $14 billion link into Midtown called the Gateway that would serve New Jersey Transit commuters as well.

That plan got a figurative shot in the arm in May, when the U.S. Department of Transportation named the Gateway proposal the most important rail-infrastructure project in the nation, and chided local leaders for dropping the ball.

“We in Washington foolishly thought that something so fundamental would certainly have a solution by now,” DOT Under Secretary Peter Rogoff said during a meeting at the Port Authority’s headquarters at 1 World Trade Center, according to Politico.

But not surprisingly, there’s some disagreement about who should foot the bill for the new link.

“The loss of a tunnel could have cataclysmic impacts on the entire regional economy,” Rogoff was quoted as saying.

Sunnyside Yards

It’s been said that each generation remakes Times Square in its own image. Likewise, it seems as though each political era sees a proposal floated to reimagine Sunnyside Yards, the 200-acre rail yard on the eastern border of Long Island City owned by Amtrak, the MTA and some private holders.

Plans to build a deck over the yards and develop real estate on top of it date back at least as far as Gov. Nelson Rockefeller’s administration in the 1960s.

Late last year, Dan Doctoroff, former Mayor Michael Bloomberg’s deputy mayor for economic development, resurrected the idea of building a convention center on the site and tearing down the Jacob Javits Center on the Far West Side to free up valuable real estate for development.

Meanwhile, earlier this year during his “State of the City” speech, Mayor Bill de Blasio made headlines again when he floated the idea of decking the rail yard and building 11,250 units of affordable housing. While that plan is far from approved, if it does get passed in any form, it could be a boon for the affordable development community. That potential was not lost on industry leaders.

“Our industry stands ready to work with the mayor and other stakeholders to put shovels in the ground and cranes in the sky to tackle this important goal,” said Steven Spinola, the then-president of the Real Estate Board of New York, after the speech.

The New York City Economic Development Corp. in February put out a request for proposals to conduct a feasibility study for developing the site.

Roosevelt Island tech campus

Count this one as a feather in the cap of policy officials trying to diversify New York City’s economy. Add a second feather for New York’s budding tech world.

In June, developers broke ground on the $2 billion Cornell Tech “applied sciences” campus on Roosevelt Island. (See related story on page 88.) Several developers, including the Brooklyn-based Hudson Companies and Forest City Ratner Companies, will see a piece of that action.

The deal, which the Bloomberg administration put together, was officially consummated in 2013 when Cornell signed a 99-year lease with the city for 12 acres of land.

The college, along with partner Technion-Israel Institute of Technology, broke ground in the spring on the first phase of developing the campus. When fully built in 2043, it will include 2 million square feet of real estate. The work is expected to create 20,000 construction jobs.

Left: The $2 billion Cornell Tech “applied sciences” campus broke ground on Roosevelt Island in June. Right: New Jersey Transit’s link to Manhattan is through 100-year-old tunnels owned by Amtrak that are operating over capacity and were severely damaged by Superstorm Sandy. The fight to add a second tunnel predates the storm.

Left: The $2 billion Cornell Tech “applied sciences” campus broke ground on Roosevelt Island in June. Right: New Jersey Transit’s link to Manhattan is through 100-year-old tunnels owned by Amtrak that are operating over capacity and were severely damaged by Superstorm Sandy. The fight to add a second tunnel predates the storm.

The first phase, set to open for classes in 2017, includes academic, commercial and research buildings as well as a $115 million, 350-unit residential dorm developed with the Hudson Companies that will be the world’s tallest passive house. 

The project is part of a broader effort by the city to ramp up the applied sciences field in the city. The EDC is also backing programs by Columbia University, NYU and Carnegie Mellon University. Combined, they are expected to generate $33 billion in economic activity and 1,000 spin-off companies.

Tech companies have been among the most active office leasees in the city in the past few years, helping to drive growth in neighborhoods like Midtown South and the Meatpacking District.

“New York City has experienced rapid growth within its tech ecosystem, and in order to maintain this growth we have to supply a pipeline of talent that will continue to innovate,” said EDC spokesman Christopher Carroll. “By helping train a workforce for the jobs of the 21st Century, the Applied Sciences campuses will drive our economy and overall competitiveness for years to come.”

The homerun is that when these techies graduate they’ll rent and buy apartments in New York, rather than decamping to Silicon Valley.

The Dryline

A team led by the Danish architect Bjarke Ingels is in the planning stages for a two-mile-long flood-protection berm on the Lower East Side along the East River.

Known as the “Dryline,” the “Big U,” or in government parlance, the “East Side Coastal Resiliency Project,” it is the first leg in what the city envisions to be a larger 10-mile long superstorm-protection barrier. That barrier would loop from 57th Street on the West Side, down around Lower Manhattan and back up to 42nd Street on the East Side. It will also involve a number of other architects and construction firms to be selected by the city, which announced a plan dubbed “A Stronger, More Resilient New York” in 2013 in response to the havoc Superstorm Sandy wreaked. In addition to hammering outer-borough areas in flood zones like the Rockaways, Sandy hit a number of high-rise Lower Manhattan buildings hard, too.

Big-time landlords like TF Cornerstone, the Moinian Group and Savanna were among them. In total, private owners suffered a massive $8.6 billion in damages, in addition to the $4.5 billion incurred by the city, according to estimates.

After the city released its plan, the U.S. Department of Housing and Urban Development launched its “Rebuild by Design” contest, offering up hundreds of millions in federal dollars to projects that could help fortify the tri-state area.

Washington allocated $930 million to seven projects in Manhattan, the Bronx, Staten Island, New Jersey and Connecticut, including $335 million for starchitect Ingels’ Dryline idea.

Stretching from East 23rd Street to just south of the Williamsburg Bridge, the hill-like levee will reach 15 feet tall at its highest point, matching the 100-year flood line, and will double as a landscaped urban park. Construction is anticipated to begin in 2017.

Meanwhile, last month the city announced it had allocated another $100 million to build a second leg of the flood-protection system, connecting at Montgomery Street, just below the Williamsburg Bridge, down to Battery Park City.

Jessica Lappin, president of the Alliance for Downtown New York, noted that these projects are hugely important for protecting the city from another washout. 

“Lower Manhattan was devastated by Sandy. Residents went without water and power for days,” she said in a City Hall news release about phase two of the plan. “There are no quick fixes or easy solutions. We need, and are grateful for, this substantial long-term investment in our future.”

Triboro Rx 

The recent boom in outer-borough development (see related story on page 100) has exposed the limits of the city’s Manhattan-centric subway system.

Aside from the oft-derided G train, most Queens and Brooklyn residents have to take the subway into Manhattan in order to get between boroughs, and the Bronx lacks any subway link to a borough other than Manhattan.

For nearly 20 years, the Regional Plan Association, the prominent non-profit planning organization for the tri-state, has called for what it sees as an easy fix: Take pre-existing rail rights-of-way and freight tracks that stretch from Bay Ridge in Brooklyn to Co-Op City South in the Bronx, and convert them to a new subway-linked route called the “Triboro Rx Line.”

Of course, any additional transportation making it easier to get around would be a boon for developers as they push deeper and deeper into the boroughs to build housing.

“Transportation is the key to successful residential development, ” said Tim King, managing partner of Brooklyn’ CPEX Real Estate commercial brokerage. “I don’t think you need to be the reincarnation of Harry Helmsley to see the effect the L train has had on Brooklyn neighborhoods.”

The RPA, which began pushing the idea in 1996, says the project would use existing freight lines to build a mostly above ground, 24-mile line with 22 stops and connections to 12 other subway lines along the way.

Because the rights-of way are already in place, there would be no need to dig tunnels. Rather, the biggest costs would be associated with building stations and installing signals. The RPA estimates the price tag at $1 billion.

The RPA brought the proposal up again earlier this year in a report on outer-borough transportation investments.

And while the idea has generated some support along the way since 1996, it faces significant hurdles, not least of which is the cash-strapped MTA.

Still, the RPA said the project is a no-brainer that could serve some 100,000 riders daily.

“The Triboro Line is one of the smartest and most cost-effective transit investments that New York could make,” said RPA director of transportation Rich Barone.