Friday, February 08, 2008

More NYU expansion

Two concerns about NYU's latest expansion presentation:

1) Their core campus will absorb at most only half of the 6 million square foot planned expansion

2) The 6 million square foot expansion does not include the 3 million additional square feet of currently leased space that could become unplanned expansion when those leases come due.

They will also add commercial uses to their ground floors, which looks like sound urban design but scares me: given NYU student spending habits, the area and environs could become a luxury shopping center to rival Fifth Avenue -- maybe even rival Columbus Avenue.

There was good news too. Their plans to expand within the core campus are encouraging. They seem to have made the tough decision to build in the plaza spaces between their faculty housing. They've decided, in other words, that angry employees are easier to abuse and placate than angry Villagers.

Two concerns remain. Their core campus can absorb only about half of the 6 million expansion. The rest could go anywhere. They recently bought Brooklyn Polytechnic and have a dorm nearby, but it's not clear how the development of that remote NYU location will alleviate their housing needs here.

There's also a hidden concern, not adequately dealt with in their presentations or in any of the responses I've seen. In addition to the 6 million sq.ft. of expansion they are planning, there's an additional 3 million sq. ft. they are currently renting -- a third of their students live in leased dormitories.

Universities don't like relying on so much leased space. Rent is money down the drain; leases are not permanent; the space is not theirs to alter or redevelop. The loss of a lease is what pushed NYU to build on St. Ann's, a decision they might have reconsidered in the light of community protest had they not been under the rental gun. Heavily committed in leased space, the university is vulnerable to pressures to shift out of it into owned space, either newly constructed or newly bought.

The role of leased space has been underplayed in these NYU presentations because it doesn't represent an expansion of their student body. Nevertheless, it could entail an expansion of their construction and purchasing plans.

Think of it: a third of their student body in 3 million sq. ft. is not represented in these plans for the 6 million sq. ft. expansion. That's half again the size of the presented expansion.

The situation may not be dire, or it may. Many of their leases do not come due until 2015 and conceivably all could be renewed. But if luxury rents continue to rise in NYC and money continues to pour in, there'll be even more pressure on owners to opt out of dormitory use and into condo or hotel use. That will leave New York City with possibly another 3 million sq. ft. of NYU new construction or new purchases to absorb.

Something to keep an eye on.

View the presentation here:

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