The owners of One HSBC Center are seeking help from national land-use and building-use experts about what to do with anticipated vacant space in Buffalo's tallest tower, space that will open up if the major tenant ends up leaving in the next year.
Seneca One Realty LLC, the New York-based investor group that owns the 38-story tower, has "been in touch" with the Urban Land Institute about conducting a panel study of One HSBC Center, similar to what was done with Kaleida Health for Millard Fillmore Hospital, said Chief Operating Officer Stephen P. Fitzmaurice.
The panel would be done "on a more limited basis" than with the hospital, he said, but would "consider what the highest and best use is for One HSBC Center."
The group, which would be doing its work this fall, has not been put together, but he said it could include urban strategists as well as hospitality specialists, investment bankers, architects, retail specialists, regional economic competitiveness strategists, community reinvestment financing experts and developers with expertise in mixed-use conversion.
Recommendations "could very well include residential units," such as condominiums, which Seneca One thinks "would work." Observers have said the views from the 850,000-square-foot tower, and the prestige associated with the address, could prove attractive.
But the investor group wants experts to thoroughly evaluate it first. "Many people locally have encouraged us to do this, but it's a significant departure from what we've been doing," Fitzmaurice said. "As a result we'd like to get an opinion from a panel including individuals who have successfully accomplished this type of conversion."
Other options could include a hotel or apartments, as well as new tenants to replace those who have left. But local real estate experts fear that could trigger an exodus of tenants from other downtown buildings whose space is not as nice, putting those buildings and landlords at risk.
Seneca One is facing a perfect storm of bad timing, as its landmark property in Buffalo - which had been considered a solid investment - could wind up being 91 percent vacant within a year. That's because the second- and third-largest tenants have either vacated or will be vacating their space, and HSBC Bank USA may follow suit when its lease expires in October 2013. And it could double the amount of vacant space downtown, causing the overall commercial real estate market in the central business district to collapse because the space can't be absorbed quickly.
Law firm Phillips Lytle LLP, the building's second-largest tenant and No. 2 law firm in Buffalo, is leaving its 85,000-square-foot space on four floors of the tower to occupy space in the former Donovan State Office Building, which is being redeveloped by Benderson Development Co. and renamed One Canalside. The Canadian consulate, the No. 3 tenant in the tower with 36,000 square feet, was closed as part of a budget-cutting decision by Ottawa.
HSBC, the U.S. subsidiary of British giant HSBC Holdings Plc, occupies 77 percent of the building, or 653,000 square feet on 22 floors. But the bank had previously indicated its intention to consider other locations for its local workforce for the long term that would better suit its needs. And the bank may not need all the space it now has since it sold its entire upstate New York retail branch network to First Niagara Financial Group.
HSBC still has more than 3,000 employees in Buffalo for other business lines and operations, both locally and nationally. It's renovating and expanding its HSBC Atrium next to the First Niagara Center to accommodate more staff and will still have space in its leased former mortgage facility in Depew.
The bank has only said it will stay in the tower "for the time being," but has not said when it would make a permanent decision.
"They're still in the process of determining a strategic plan for operations in the United States," Fitzmaurice said. "They would begin to define their real estate needs based on that, and hopefully be able to tell us what they may need at the tower in the near future."
In the meantime, Fitzmaurice said, Seneca One will "continue to actively solicit tenants for the tower." Other tenants currently include the Oishei Foundation, the Seymour H. Knox Foundation and UBS Financial Services, but they occupy a small part of the building.
Fitzmaurice said the landlord also signed Seneca Holdings a few months ago, is "speaking with three prospective tenants" and has successfully rented some furnished individual offices.
Additionally, he said, Delaware North Companies' broker at Studley in Miami has spoken with Seneca One's leasing representative. The Buffalo-based hospitality company just announced that it is conducting its own real estate review for its headquarters, currently in 100,000 square feet at the Key Center building at Fountain Plaza. The company said it wants to stay downtown.
But Fitzmaurice wouldn't say if Delaware North is interested.
"As with any prospective tenant, we don't comment on that process," he said.