The Port Authority of New York and New Jersey (PA) has kicked off a $10B redevelopment of the Port Authority Bus Terminal which will include two new office towers over a rebuilt bus depot.

“This is a game-changer. This is one of the largest projects that the Port Authority has undertaken in its 103-year history,” Kevin O’Toole, PA chairman, said at a press conference.

Rick Cotton, executive director of the PA, acknowledged that the dilapidated, 73-year-old bus terminal—the largest in the U.S. and, the agency says, the busiest in the world—is in need of an urgent redo.

“The bus terminal has become a poster child for failed legacy infrastructure that desperately needs to be replaced,” he said. “Our goal is to build a world-class bus terminal that is worthy of this region.”

The 10-year project will be built in three phases, beginning this year:

The first phase, from 2024 through 2028, includes rebuilding the ramps that take buses directly into the Lincoln Tunnel from the bus terminal, plus reconstructing the staging and storage area that will house buses during phase two.

In phase two, from 2029 through 2032, the bus terminal will be torn down and rebuilt. It will be replaced with a facility that is configured for electric vehicles, Cotton said.

Phase three envisions building two office towers above the easternmost portion of the main terminal, after the new bus terminal is completed.

The office-tower scheme is designed to provide a big chunk of the financing for the project. The PA is hoping to develop payment-in-lieu-of-taxes agreements with NYC to build two towers of commercial space, providing about $2.5B in funding.

PA also is seeking a $1B loan from the Federal Transit Administration, which is expected to sign off on the plan this summer, according to a report in The Record.

Cotton expressed confidence at the PA press conference that Manhattan’s office market will rebound by the mid-2030s in time for the development of commercial towers at the new bus terminal.

Hopefully, the timing will be much better than the state’s 2022 plan to redevelop Penn Station, which envisioned a bunch of office towers encompassing 18M SF to help finance the rebuilding of another aging transportation center, a project that will cost as much as $20B.

In January 2023, Vornado CEO Steven Roth disclosed in an earnings call that the REIT had decided to pause all new construction in the Penn District. Roth said the prospect of new office tower construction in the city for the foreseeable future is “almost impossible” due to tight lending conditions.

In June, Gov. Kathy Hochul said the state would no longer wait for Vornado to lift its pause. The governor “decoupled” the Penn Station rebuild from Vornado’s Penn District project, which was supposed to pay for half of the train station redo.