Financial-Services Firms Start to Scout for New Office Space
December 09 2016 - 04:28PM
Dow Jones News
By Keiko Morris
Big financial-services firms, looking to cut costs and
anticipating policies of President-elect Donald Trump, are cranking
up searches for new office space as their current leases near
expiration.
Asset-manager AllianceBernstein LP and HSBC, a unit of global
banking giant HSBC Holding Plc, have been checking out properties
that offer hundreds of thousands of square feet, according to
people with knowledge of their searches.
Investment firm KKR & Co. and Wells Fargo Securities already
have committed to moving to 30 Hudson Yards. BlackRock Inc. said
Thursday it was taking 850,000 square feet at 50 Hudson Yards, a
2.9-million-square foot tower expected to open in 2022.
Real-estate executives said at least some of the activity,
anticipated next year, will be inspired by a feeling that the
financial-services sector will expand as Mr. Trump moves to cut
corporate taxes and trim business regulation.
At the same time, banks are keeping a keen eye on costs, looking
to put more people into less space and opting for cheaper
neighborhoods and cities for less-essential functions, executives
said.
"What we are seeing is the use of less space per person to keep
the cost structure flat," said Michael Shenot, managing director at
real estate services firm JLL. "The other thing we are seeing is
the movement of middle management jobs to lower cost locations
while continuing to move high-value jobs here in Manhattan. That's
going to go on for the next couple of years."
It takes years for a big financial firm to move offices. The
lease on AllianceBernstein's 600,000-square-foot office at 1345
Sixth Ave. runs through 2024 but the company already has started
looking, spokesman Jonathan Freedman said.
Hudson Yards, 4 Times Square and 1271 Sixth Ave. are among the
options the company has checked out, according to people familiar
with the search.
"We are certainly looking for a dynamic new collaborative
workspace for the future of the firm," said Mr. Freedman said.
HSBC, which has space at 452 Fifth Ave., also has been checking
potential new offices, people familiar with the company's searches
said. Its lease expires in 2020.
"We regularly review our real estate portfolio to ensure it
remains appropriate for the future needs of the business," an HSBC
spokesman said.
Since the recession, the financial-services sector has been
retrenching. Tougher regulation and a trend toward digitization
have dampened the sector's employment, which hasn't fully recovered
to pre-financial-crisis levels, said Madeline Eldridge, a market
analyst with CoStar Group Inc.
What's more, big companies have been moving more jobs to cheaper
areas of the U.S. and abroad. Last year, J.P. Morgan Chase decided
to relocate 2,150 jobs from New York City to Jersey City in
exchange for $19 million in tax credits over 10 years.
The share of Manhattan office space occupied by financial
services companies has fallen to 25% from 32% in the past four
years, according to JLL. Meanwhile the technology, advertising and
media sectors together have increased their share of office space
in Manhattan from 19% to 24%.
In the past, relocations for big financial institutions have
resulted in consolidations and a shrinking of the company's overall
office space in the New York metro area, Ms. Eldridge said.
"This is largely a musical chairs game," she said.
New construction is focusing on denser offices with more
communal amenity space, said Ramneek Rikhy, senior vice president
at CBRE Group Inc.
Related Cos. and Oxford Properties Group, the developers of the
28-acre Hudson Yards project, already have drawn marquee names in
the financial sector from Midtown Manhattan's swanky Park Avenue
office market as well as the Plaza District.
"It is very difficult to renovate around existing tenancy," said
Jay Cross, president of Related Hudson Yards. "So it's easier to
say, 'I'm going to shift both neighborhood and office
environment."
(END) Dow Jones Newswires
December 09, 2016 16:13 ET (21:13 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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