Vornado Realty Trust is planning renovations to some of its properties around Penn Station, The Wall Street Journal reported this week. The plans are partially motivated by the desire to attract technology and media tenants to the properties, according to the report.
“We benefit from spillover from the Chelsea and Park Avenue South submarkets, which are flooded by tech firms and workers who don’t wear ties,” Steven Roth, newly named chief executive officer, wrote in a recent letter to shareholders.
The REIT owns 6.7 million square feet of Class A office space in the Penn Plaza District, according to a recent filing with the Securities and Exchange Commission. One of Vornado’s properties in the area, at 7 West 34th Street, is a target for renovation.
Vornado will reconvert the 450,000-square-foot property from showroom space to an office building. The decision is a sound business choice, according to industry analysts, especially with rents approaching $60 per square foot.
“I’m not sure how much the showrooms would pay, but obviously Vornado thinks the highest and best use is office space,” Dan Fasulo, managing director at Real Capital Analytics, told The Commercial Observer. “I’m sure they will be able to raise income of the property after renovation.”
Current showroom tenants at 7 West 34th Street include Pacific Coast Home Furnishings, Harper Group and Kurt S. Adler Inc.
The boundaries of where technology firms are willing to go are expanding due to the lack of vacancy in Midtown South, Mr. Fasulo added. “There is significant demand from a variety of high-end service firms and technology firms to be in the Midtown South corridor,” he said.
Once repositioned, the property at 7 West 34th Street could have the unique ability to attract a single large user, with tenants such as Amazon looking for space.
“Given the success of the Empire State Building in attracting high profile tech tenants, I can’t imagine this property having a hard time attracting tenants,” Mr. Fasulo said.
Vornado did not return requests for comment.