The owners of Buffalo’s tallest building said Wednesday they are convinced the tower can still have a strong future, following confirmation Wednesday that HSBC Bank USA will leave the building next year.
The building’s owners are proceeding with previously announced plans to bring in the Urban Land Institute as an adviser to help evaluate options for the 38-story tower, which will have lost its three main tenants by the end of next year. That will leave it 90 percent vacant.
HSBC’s announcement was not unexpected. The bank said no jobs will be lost due to the move.
“It’s given some clarity to the situation, so that’s a good thing,” said Stephen P. Fitzmaurice, chief operating officer for Seneca One Realty LLC, the New York City-based investment group that owns One HSBC Center.
“We remain convinced that in the long-run, this building is going to be an integral part of the continuing success of the waterfront and downtown,” he said.
HSBC is the largest tenant, occupying 22 floors, or 75 percent, of the building. Law firm Phillips Lytle LLP, the No. 2 tenant with 85,000 square feet, has announced plans to move down the street to the former Donovan State Office Building, which is being rebuilt into offices and a hotel. The No. 3 tenant was the Canadian consulate, which closed this year.
The remaining tenants are much smaller, and there are few large local entities that lease space. The options that have been raised include converting large portions of the structure to other uses, such as a hotel, apartments or condominiums.
“We’re looking at this as a new beginning,” Fitzmaurice said. “We’re hoping to have some very exciting plans for the building going forward. Hopefully, the tenants that we have will embrace it. We’re looking forward to the future.”
According to an email to a government official that was provided to The Buffalo News, HSBC said that the announcement is just “a real estate decision and does not affect our overall employment in the region.” HSBC will “remain a notable private-sector employer in the area” and will “continue to support community initiatives commensurate with the size and scope of our business there,” the email said.
“The fact that we’ve just announced that we are staying here and we will be renovating both the Atrium, as well as our facility in Depew, I think, should be interpreted as a very positive message that HSBC is here and is here to stay,” said Kevin Quinn, the bank’s senior executive in Buffalo.
That commitment was a relief to area leaders.
“I want to thank HSBC for its recommitment to our city by keeping its existing operation in the downtown business district and Depew, with no anticipated job loss as a result of its move from One HSBC Center,” said Buffalo Mayor Byron W. Brown.
U.S. Sen. Charles E. Schumer, D-NY, who has been lobbying the bank over the past year to “secure these positions,” called the announcement a “piece of critical and welcomed news.”
“HSBC and business and community leaders should work together to ensure that the tower is put to good use,” he added.
Erie County Executive Mark C. Poloncarz said the addition of so much vacant space to the market is “concerning,” but “it is good to note that HSBC remains committed to working here in Erie County.”
HSBC’s announcement brings closure to significant uncertainty over the HSBC tower and the downtown real estate market since 2010, when HSBC first requested proposals from developers for other locations that would better fit its needs.
The bank had been leaning toward building a complex a block away, on the so-called Webster Block, but that idea was derailed after a new CEO, Stuart Gulliver, launched a review of all HSBC business. A major reorganization and strategy shift followed, with the bank closing or selling unprofitable or undesirable businesses and getting out of some countries in a bid to save $3.5 billion.
HSBC sold its upstate New York branches to First Niagara Financial Group, sold its U.S. credit card business to Capital One Financial Corp., and agreed to transfer its mortgage business to PHH Mortgage, a subsidiary of PHH Corp. of New Jersey.
And local observers have fretted over its decision about the tower, whose empty space will now double the total vacant space downtown all at once.
“It’s something we all knew was coming,” said Shana Stegner, director of office sales and leasing for real estate brokerage CBRE in Buffalo. “At least now people can prepare and move forward with what’s actually going to happen there.”
The nearby Atrium, which HSBC owns, has had 1,100 employees in the past, but Brown said he was told it now has only 400 to 600. The facility is undergoing a renovation and will be able to accommodate as many as 2,100 workers.
HSBC leases the Depew site, located at the intersection of Walden Avenue and Dick Road, from Benderson Development Co., and Quinn said the bank will exercise its option to renew its lease next year for at least five more years. “Every lease has options to extend,” he said.
Downtown Buffalo office space Vacancy Type Total space rate Monthly rent
Class A 3.96 million sq. ft. 4.4% $19-$24 sq. ft
Class B 4.3 million sq. ft. 12.9% $15-$18 sq. ft
Class C 4.7 million sq. ft. NA NA
Source: CBRE Buffalo from Jan. 2012 email: firstname.lastname@example.org