Heavy lease rollover for financial firms in 2013, 2014

An unusually large chunk of space leased by the city’s biggest financial firms is coming due four and five years from now, but until then the space will be on the company’s books as they navigate the economic downturn.

Some 6.3 million square feet, or 20 percent, of the 30 million square feet leased by the top 15 financial companies in Manhattan have expirations in 2013 and 2014, said Michael Geoghegan, vice chairman of the New York Tri-State region for CB Richard Ellis.

However, the companies, which were not individually identified, are locked in to the leases until then, limiting their ability to shed expensive space that is no longer needed as they lay off employees.

“For the next few years there is not going to be significant [lease expirations] for the banks. So as those banks strive to right size and potentially downsize their real estate portfolios there won’t be a significant opportunity to do that,” he said. Between 2009 and 2012, there is about 4.5 million square feet of space expiring.

Geoghegan, along with Robert Alexander, chairman of the company’s Tri-State region, and William Shanahan, vice chairman of CBRE’s investment properties institutional group, spoke about leasing and investment sales during a quarterly briefing by CBRE at its Midtown offices today.

Alexander said he did not know what effect the large lease rollovers would have on the market in four years, but that the financial firms would begin planning their occupancy needs in 2009 and 2010.

He also added, commenting on investment sales, that he saw evidence within the bond market that liquidity necessary for financing building purchases was improving, yet the firm was still telling clients to hold off on trying to sell properties.

“We just got off the phone yesterday with a big institution and we advised them to go on hold with the sale of their assets until the end of the first quarter, and then we would revisit it,” he said.

CBRE also reported its year-end leasing statistics, showing overall Manhattan leasing activity was 17.56 million square feet, down 23 percent from 2007, while net absorption went from a positive 1.92 million square feet in 2007 to negative 12.57 million square feet last year.

Between December 2007 and December 2008 the rate that all properties that will be available for leasing within 12 months, rose to 11.3 percent from 7.9 percent.

Average asking rents have fallen to $67.20 per square foot in December 2008 from $68.69 per square in the final month of 2007, the company reported.