Gov. Kathy Hochul put plans for an office complex around Penn Station on hold after Vornado Realty Trust halted development on the ground.

The governor announced that the state is “decoupling” the station’s redesign from a broader plan to fund it by building an 18 million-square-foot commercial tower next to it. She also kicked off a redesign of the station, saying the state is open to new ideas for the project.

“We’re decoupling the two components,” Hocher said at a news conference on Monday. “We will focus on the building itself and its surroundings.”

Hochul said the decision didn’t mean office buildings would never be built around the station, or that demand for such spaces wouldn’t resume.

“We have to face reality,” she said, adding that the redesign push would provide time to reconsider broader development, perhaps including more housing.

Part of the reality is that Vornado is abandoning development from scratch. Chief Executive Steve Roth has repeatedly cited the unfavorable economic environment for commercial projects, though he insists that the suspension of the Penn tower does not mean the company is abandoning development there entirely. Vornado controls most of the eight sites around Pennsylvania that are part of the governor’s plan, which Ross said last month “will likely begin as an apartment project.”

Renderings of the redesign
Redesign Renderings (New York City Mayor’s Office)

Hochul’s announcement was not a surprise, as the governor has said before indicated She is open to alternatives for station renovations. The redesign and extension of the station and wider development around it are already separate projects. The governor said Monday that she would not wait for the proposed tower to generate revenue to fund other projects.

The broader development aims to fund the upgrades of the transit hub through proxy taxes, tax-exempt bonds and federal loans. PILOT is expected to generate as many $3.75 billion.

On its own, the overhaul of the station is expected to cost $7 billion. The state has committed $1.3 billion to the project, and Hochul said the state has applied for federal funding.

This isn’t the first time Hochul has shelved certain aspects of the state’s broader vision for Penn. Within months of taking office, she tweaked former Gov. Andrew Cuomo’s plans and put the station expansion on hold, opting to focus on renovations and large-scale development around it. The extension will require the state government to take control and demolish more than 50 properties south of the station.

Over the past two decades, Penn Station’s redevelopment plans have failed several times, and Hochl has hit some speed bumps.

The governor described Monday’s announcement as the start of the design process, but the news comes a year after she announced the state would begin accepting bids for Penn’s redesign. In September, the state awarded a $58 million contract to FXCollaborative Architects and WSP USA for preliminary engineering and construction work. British architect John McAslan + Partners has also been hired as a partner.

According to the MTA, the design team has just received a “notice to proceed,” which means it can actually begin work on the preliminary design contracted a year ago. At the conclusion of this work, including the environmental review, the MTA will require the firm to complete the remaining design and construction work.

The redesign will be based on the station master plan, which includes the removal of the station’s upper floors to create a 250,000-square-foot, single-story facility. It also includes a concourse larger than Moynihan Station and Grand Central Station combined. But the hall would be built on a block-long area that included a disused taxiway owned by MSG Entertainment, which did not support the idea.

MSG sent a letter to the city planning agency last week saying “conceptual plans for Penn Station redevelopment are not feasible,” noting that the train station concourse in the middle of the block would cause problems for trucks heading to the arena.

While MTA President Janno Lieber briefly discussed Penn’s vision, Hochul said the state is “considering all redesign options.” She said the state is willing to let any construction and engineering firm compete for the opportunity to undertake the project.

Still, Monday’s announcement appeared to overshadow a well-publicized plan pushed by Italian firm ASTM Group to tear down MSG’s Hulu theater.

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