The Real Deal New York

Big banks slash NYC office space by 6M sf in four years

October 09, 2013 11:51AM

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Dennis Friedrich and a rendering of Brookfield Place

Dennis Friedrich and a rendering of Brookfield Place

Rather than reabsorbing the office space they cast off during the economic downturn, big banks are continuing to decrease their presence in Manhattan. The 10 largest banks in the city reduced their space by 6 million square feet to just under 32 million square feet between 2008 and early 2012, according to a report by International Strategy & Investment Group.

Since that report was issued last year, banks are planning on further decreasing their space, leading to a stubbornly slow pace of rent growth in the office market. Landlords and brokers have shifted their attention to tenants in the technology, advertising and media sectors.

The large financial firms are “not as relevant to today’s market, for now,” Dennis Friedrich, CEO of real estate investment trust Brookfield Office Properties, told the Wall Street Journal. “We’ve changed our strategy.”

Earlier this year Brookfield rechristened its Downtown office tower Brookfield Place, changing the name from World Financial Center, a nod to the waning influence of financial tenants, according to the newspaper. Earlier this month, a Bank of America lease in the building from the 1980s expired, leading the bank to reduce its presence from 2.3 million square feet to 800,000 square feet. [WSJ]Hiten Samtani

  • How Could you

    Yea sure. They are expecting something big to happen soon. Really big. Depression era big.

  • David Brown

    Totally forseeable. Dodd-Franks drives down ROI for financial firms from 20% to 10%. Obviously moving across the bridge to Brooklyn to save 10% isn’t going to help. Moving to Texas to save 50% is the solution. NYC is a high cost “luxury” brand and depends on high return industries to pay the way. Commodity products, which is most of commercial banking and insurance, can’t pay for a “luxury” address. There will be a lot of smaller finance groups remaining, indeed they will probably pay more per square foot, but 20,000 square feet at $100 doesn’t help you if you have 2,000,000 at $50 vacant.

    • Realistic

      If they have’t fled for Texas yet I doubt they are going to do it now. These people aren’t trading Broadway for the Rodeo.

      • David Brown

        Dodd-Franks was enacted in 2010. Most financial institutions in NYC, which are covered by it, were in multi-year leases for NYC buildings at that time. As noted in the article the finance sector has been a net reducer of space since the enactment ofr Dodd-Franks. However, this is like an iceberg, inasmuch as what is visible represents the smallest proportion. What is scary is all the people looking at lease expiries three-five-seven years down the road and considering relocation as an option. The flight to lower cost geographies has simply passed the first battle – the war remains.

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