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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