In a play that would reverberate through Manhattan’s East Midtown district, TF Cornerstone and MSD Partners LP intend to redevelop the Grand Hyatt New York hotel, adjacent to Grand Central Terminal, in collaboration with an affiliate of Hyatt Hotels Corp.
The new 2 million-square-foot mixed-use development would replace the existing building with Class A office space, retail space and a new Grand Hyatt hotel (albeit smaller than the current 1,298–key behemoth), as well as improvements to the public transportation infrastructure in the Grand Central Terminal complex.
Assuming it passes approvals from the State of New York and the City—and also receives appropriate funding commitments—the project would transform the site at 42nd Street and Lexington Avenue. Plans reportedly are not yet far enough along to more precisely specify the components of the proposed final project.
The would-be developers state that the project is feasible based on their development rights by virtue of owning Grand Central Terminal, “combined with the increase in density permitted in accordance with the recently approved rezoning of East Midtown to support new office development and infrastructure investment.”
“We are proud to support sustainable, transit-oriented development with new Class A office space, retail and a Grand Hyatt hotel adjacent to Grand Central Terminal. The development will provide transit improvements that will transform the experience for hundreds of thousands of commuters every day,” Jake Elghanayan, a principal with TF Cornerstone, said in a prepared statement.
A busy part of Manhattan
One Vanderbilt, SL Green’s 58-story, 1.7 million-square-foot office tower on the opposite side of Grand Central Terminal from the Grand Hyatt, is chugging along nicely. It’s due for completion in 2020 and last April signed law firm McDermott Will & Emery LLP to a 20-year lease for four full floors.
More recently, the Metropolitan Transportation Authority jumped on a one-time opportunity to buy Grand Central Terminal itself, for about $35 million, from a private holding company. The deal short-circuited a lease that otherwise was going to run for another 270-plus years.
In 2018, the Midtown Class A office market enjoyed one of its strongest years ever, with nearly 18 million square feet of leasing activity, according to a fourth-quarter report from CBRE. A disproportionate percentage of the leasing involved spaces of 50,000 square feet and up. Availability is now down to 11.2 percent, Midtown’s lowest quarterly level since the end of 2015.
The average asking rent nonetheless decreased by 1 percent year-over-year, to $79.19 per square foot, in part because of strong leasing in higher-priced, large-block buildings. “Although these large relocations will create future vacancies, the impact will be spread over several years and will not significantly impact availability in the upcoming year,” the report stated.
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