David M. Levitt

Midtown Manhattan may have been down, but it’s not out.

If the office district’s supremacy had been threatened by the rise of Hudson Yards on the far west side and the rebuilding of the World Trade Centre to the south, JPMorgan Chase’s decision to build a taller skyscraper on the site of its current Park Avenue headquarters says it’s still New York’s power centre.

The bank plans to demolish the almost-60-year-old building it owns at 270 Park Avenue and replace it with a 70-to-75-storey tower that would be ready in about five years. It would be the first major project under the city’s Midtown East rezoning, an effort to encourage new office construction in the area.

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For companies drawn to new developments like Hudson Yards, it was less a matter of geography than the appeal of glitzy new skyscrapers – a stark contrast with Midtown’s ageing office stock, according to Marc Holliday, chief executive officer of landlord SL Green Realty.

JPMorgan’s commitment to Park Avenue showed the neighbourhood around Grand Central Terminal was still a magnet for New York’s biggest companies, and its project would generate momentum for further development, he said.

The bank’s decision “will just solidify the importance of this area to the city,” said Holliday, whose company is building the One Vanderbilt skyscraper nearby.

“Given the opportunity to build new construction in east Midtown, it will almost always be corporations’ first choice to plant their flag.”

JPMorgan’s announcement comes after a few years in which several high-profile financial companies have left Midtown for Hudson Yards and the Financial District. BlackRock, the world’s largest asset manager, will relocate from Midtown East to 50 Hudson Yards, and buyout firm KKR & Co is buying offices at 30 Hudson Yards, leaving behind 9 West 57th Street, one of Manhattan’s most prestigious office addresses.

JPMorgan itself was in negotiations in 2014 to move to Hudson Yards, talks that fell apart.

It’s an exaggeration to say those moves suggest that companies are abandoning Midtown, according to Holliday. It just means they like new buildings.

“It’s not the West Side, it’s new construction,” he said. There is demand by major corporate tenants “for new, state-of-the-art buildings that can offer things that older buildings can’t offer, even when they’re redeveloped.”

About 77 per cent of Manhattan’s 37 million square metres of offices was built before 1980, according to Richard Persichetti, US Northeast research director for brokerage Cushman & Wakefield.

While JPMorgan wouldn’t comment on the price tag for its new headquarters, SL Green’s One Vanderbilt – just west of Grand Central – is costing about $US3.31 billion ($4.23 billion) to develop, and a plan to rework the tower at 666 Fifth Avenue was slated at about $US4 billion. JPMorgan’s project “is not expected to have a material impact” on the bank’s financial results, according to the statement on Wednesday.

Should the plan go forward, JPMorgan’s 52-storey current headquarters, completed in 1961, would be the world’s tallest voluntarily demolished tower ever, according to the Council on Tall Buildings and Urban Habitat.

It’s all in the name of modernisation. Rules rezoning 78 blocks between East 39th and East 57th streets took effect in August, allowing for bigger, taller buildings. It was the culmination of a five-year effort started by then-mayor Michael Bloomberg and is expected to pave the way for more than 557,000 square metres of new office towers in the area. (Bloomberg is the founder and majority owner of Bloomberg News parent Bloomberg LP.)

Under the new rules, landmarks may sell their unused development rights anywhere in the district, rather than just to the properties in their immediate vicinity. JPMorgan plans to buy such development rights so it can build a taller tower.

In Midtown alone, JPMorgan leases at least 325,000 square metres of offices spread across 12 buildings, according to data from CoStar Group. Much of that space could wind up empty after the bank consolidates into its new headquarters. Included in the tally are large blocks at nearby Park Avenue towers, 277 and 245. Chinese conglomerate HNA Group is seeking to sell 245 Park Avenue, which it bought less than a year ago for $US2.21 billion.

JPMorgan also owns properties such as 383 Madison Avenue, the former Bear Stearns tower, and leases offices in other locations such as lower Manhattan, Brooklyn and New Jersey’s Hudson River waterfront.

The bank’s headquarters project will push building owners in Midtown to step up their games, as tenants demand more up-to-date offices, according to Peter Hauspurg, chief executive officer of brokerage Eastern Consolidated.

Office landlords, he said in an email, “are going to have to completely redo their tenant spaces – assuming they can’t build new – in order to compete with the new generation of product coming online.”

with Patrick Clark and Jenny Surane

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