In a few years at some point, the MTA will have opened a great expanse of new retail space. The Fulton Street Transit Center will feature more than 30,000 square feet of retail space out of a total of 70,000 square feet, and the 360,000-square-foot East Side Access terminal will have 23,000 square feet of retail space. With the need to find an efficient and skilled operator for these spaces, privatization may be on the table.
In an article in Crain’s New York, Jeremy Smerd recently delved into the MTA’s plans for the spaces. While Metro-North currently operates the Grand Central retail space, the agency seems to recognize that transportation should trump its focus on the space. “Ultimately, our core competency is transportation,” an official said. “We want to try this method of operations at the Fulton Center, and we’ll see how it does.”
So what’s the plan at the East Side Access station? It’s going to be a few years before we have a definite answer, but right now, the MTA is thinking about privatizing some aspect of operations. Smerd reports:
The Metropolitan Transportation Authority is considering outsourcing the management and operations of the tunnels and 360,000-square-foot station being built to bring Long Island Rail Road trains into Grand Central Terminal under the East Side Access project. The authority paid Scottsdale, Ariz.-based InfraConsult $600,000 to determine the feasibility of outsourcing the operations of the concourse, 90 feet under Grand Central. The company completed its report in February. It has not yet been publicly released.
An MTA spokesman said the authority was particularly focused on whether it should outsource the maintenance of the 360,000-square-foot concourse, which includes 23,000 square feet of retail space. “We don’t know for sure if we are going to go the RFP route,” the spokesman said.
A British trade journal, PPP Bulletin, reported last week that the MTA was considering a public-private partnership at the site. The spokesman told Crain’s Insider Thursday that the privatization would be limited to the operations of the station, not the new tunnels, which will be run by the MTA. But the consultant on the project on Friday said the report examined privatizing both the station as well as the tunnels’ operations and maintenance. “Our objective was to determine whether it would benefit the long-term operations of the new East Side Access program to use the private sector to operate the tunnel component and the terminal component,” said Mike Schneider, a managing partner with InfraConsult.
It’s probably a bit premature to read anything into this development. It’s an exploratory move by the MTA, and the authority won’t have to confront the question head on until 2016 or 2017. Yet, with the public-private partnership moving forward for Fulton Street — the RFP will come out next month — it’s hard to envision the authority not following a similar path.
So should they? On the one hand, the authority should focus on transportation offerings. But on the other, rail companies across the globe have made significantly dollars on real estate. The MTR in Hong Kong is essentially a real estate company that operates the trains, and others have exploited their holdings far more effectively than the MTA has. I’ll be curious to see the terms attached to Fulton St., but such a deal there or underneath Grand Central isn’t necessarily a slam dunk.