That Related-funded Hudson Yards economic report? Here are 3 big questions it doesn t answer Study claims megadevelopment will contribute $18.9B annually to NYC, more than Iceland’s GDP
A new study claims Related Companies massive Hudson Yards project will contribute $25.6 billion to New York’s gross domestic product during construction, and another $18.9 billion annually after completion. That s bigger than the GDP of Iceland!
But the report, commissioned by Related, authored by consultancy Appleseed and published Monday under the title An Investment That s Paying Off, leaves a number of questions left unanswered. Here are three of the biggest:
1. No vacancy: The report claims that once completed, Hudson Yards will generate (directly and indirectly) more than $42.1 billion in annual output. Of that, $18.9 billion will be a net contribution to GDP (i.e. Hudson Yards’ output minus its input costs). But that’s based on the assumption that its office vacancy rate will be merely 5 percent. Is that realistic?
Midtown’s office availability rate stood at 10.6 percent in the first quarter, according to Colliers International, and signs point to a softening market. Adding millions of square feet of office space at Hudson Yards should push up vacancy rates in the medium run. And historically, most giant office projects like the Empire State Building or the World Trade Center struggled with high vacancy rates after completion. Besides, if there is near-limitless demand for expensive new office space, why is Silverstein Properties struggling to fill 2 World Trade Center?
Related’s Michael Samuelian argues that Hudson Yards is simply a better product, and that the fact that its first two office towers are vi阿拉爱上海同城 rtually leased up means subsequent towers will likely also be fully leased. That s possible, but there is no guarantee that will happen, and assuming a 5 percent vacancy rate in the face of far less rosy real-world numbers seems suspect.
2. Moving Peter to pay Paul: Even if all Hudson Yards towers are fully leased, many of those tenants have come and will continue to come from Midtown. What is $42.1 billion in output worth if it’s merely shifted over from other parts of the city? If businesses that directly and indirectly generate $42.1 billion worth of annual output leave Midtown and relocate to Hudson Yards, for example, the net benefit to the city is $0.
The report’s authors recognize this and concede that Hudson Yard’s net benefit to the city will be smaller than $42.1 billion at first. Still, given the demand for new space amid Manhattan’s aging office stock, Appleseed’s president Hugh O’Neil argued that “it doesn’t take long before all that office space becomes totally a net addition to city’s economy.” And Samuelian pointed to a 2013 report by the Independent Budget Office, which argued that New York will need to add 52 million square feet of office space by 2040 to meet demand.
The logic holds that in the long run, having more high-quality office s[……]