In recent weeks, multiple financial-services firms have arranged to vacate large blocks of Manhattan office space and have sold off some of their large properties. This is both good and bad news, analysts say, for a Manhattan that often uses financial services as a barometer for the commercial market’s immediate future.
Last week, HSBC confirmed that it was putting up for lease floors 12 through 29 of its headquarters at 452 Fifth Avenue, opening up over 200,000 square feet overlooking Bryant Park.
A subsidiary of Citigroup, Smith Barney, is planning in 2009 to leave its space at 333 West 34th Street—the Smith Barney building—though a Citigroup spokeswoman said it was unclear where the operations will move to. Smith Barney occupies the bulk of the 300,000-square-foot building.
Others have trimmed their expansion plans: Macquarie Bank is said to have put on hold a search for a large chunk of office space. And Citigroup has been especially active in dropping buildings from its real estate portfolio. The bank is said to be close to selling its 2.6 million-square-foot 388-390 Greenwich Street in Tribeca, and it sold the Smith Barney building to SL Green earlier this year.
While brokers are quick to caution about reading too much into the recent moves, uncertainty in the financial world is undoubtedly causing concerns in the real estate industry, with brokers and landlords keeping a very close watch on Wall Street. Financial-services firms regularly lease more top Manhattan office space than any other industry.
“I think that there is going to be belt-tightening, and that certainly will soften the real estate market,” Kathryn Wylde, the CEO of the Partnership for New York City, said.
With each week seems to come another economic indicator or report that paints a dire picture of the financial industry nationally, one that obviously translates into tough times in New York, given that about 5 percent of the city’s workforce is employed directly by the financial firms. Banks seem to be jumping on top of each other to announce write-downs in the multibillion-dollar range, numbers that, should they continue, will undoubtedly take tolls on operations of the companies. And analysts fear whole branches, or even entire companies, such as E-Trade, could fold.
For now, layoffs have been relatively minimal, while banks have been hesitant to make any decisions about location before the end of the year, brokers say.
“I think a lot of people are being cautious and are making sure that they have everything organized and right before they pull the trigger,” the president of Jones Lang LaSalle’s New York region, Peter Riguardi, said. “They are clearly challenging head count projections that come to them.”
Of course, office vacancies are at very low levels right now, so cuts in the financial industry could come as a relief to businesses struggling to find Manhattan space amid the high cost of office space.
“On the flip side,” Ms. Wylde said, “the commercial office rents have gone so high that maybe an adjustment will actually be good for the New York real estate market.”
Landlords, surely, would beg to differ, at least publicly.