As the global banking crisis continues to spread, so does its potential impact on the office market in the world’s financial hub.
Credit Suisse, Signature Bank and First Republic Bank combine to occupy more than 2M SF of office space in Manhattan, according to Avison Young data provided to Bisnow. It is unclear what the future holds for the landlords of the banks, whose leases have expiration dates ranging from 2026 to 2038.
After Credit Suisse was taken over by its larger Swiss rival UBS Group on Sunday in a $3.25B rescue mission, it became the third major bank taken out of the market in nine days, and concerns are rising that First Republic Bank is next.
Eleven major banks put $30B of deposits into First Republic late last week, but the infusion did little to assuage investors. Shares in the San Francisco-based lender were down more than 48% in trading Monday afternoon and have dropped 90% already in 2023.
In New York, First Republic occupies roughly 212K SF at 410 10th Ave. in a lease that runs until 2034 and almost 140K SF at 1230 Sixth Ave., which expires in 2026, according to Avison Young. 601W Cos. bought 410 10th Ave. — where Amazon is the largest tenant — for $950M from SL Green in 2020. 1230 Sixth is part of Rockefeller Center and owned by Tishman Speyer.
Credit Suisse occupies 1.3M SF in Manhattan, the vast majority of which is at its U.S. headquarters at 11 Madison Ave., where the investment bank signed a 20-year, 1.2M SF lease in 2014.
SL Green owns the 2.2M SF 11 Madison building, paying $2.6B to acquire it a year after Credit Suisse signed its lease renewal. It later sold a 40% stake in the building to PGIM. Yelp leases 200K SF at that building, but it announced it was closing that office last year. A representative for SL Green declined to comment.
Credit Suisse has a second location at 315 Park Ave. South spanning just over 18K SF in a deal that runs out in 2029, according to Avison Young.
UBS Chairman Colm Kelleher said at a weekend press conference it was too early to say if there will be job cuts as a result of the merger. Credit Suisse announced plans to cut 9,000 global jobs over the next three years back in October.
“We will be considerate employers, but we need to do this in a rational way, thoughtfully when we’ve sat down and analyzed what we need to do,” Kelleher said.
UBS has 1.1M SF in three office locations in Manhattan, with its headquarters at RXR Realty’s 1285 Sixth Ave., where it signed a 900K SF lease in 2016. The deal, the largest of that year, runs until 2032 and was signed as the Scott Rechler-led firm bought the 1.8M SF building for $1.65B, The Wall Street Journal reported.
UBS also leases 124K SF at 299 Park Ave. until 2032 and 152K SF at 787 Seventh Ave., according to Avison Young’s data. Outside of the city, UBS leases the 617K SF complex at 1000 Harbor Blvd. in Weehawken, New Jersey, which Jeff Sutton and institutional Korean investment firm KTB Securities paid $219M for in 2021, according to PincusCo.
Signature Bank, which was shut down by regulators March 12, has a total of 412K SF in Manhattan across four locations, per Avison data. Its largest space at Empire State Realty Trust’s 1400 Broadway spans 281K SF after expanding there last year to occupy a third of the building, The Real Deal reported.
The bank, a major player in the city’s multifamily lending space, had nearly 87K SF at Silverstein’s 1177 Sixth Ave., 31K SF at Stawski Partners’ 565 Fifth Ave. and 14K SF at Jack Resnick & Sons’ 485 Madison Ave.
Late Sunday, Flagstar Bank, a subsidiary of New York Community Bancorp, agreed to buy $38.4B of the assets controlled by Signature Bridge Bank, the receiver previously established by the Federal Deposit Insurance Corp., and assume all of its deposits. The remaining $60B of Signature’s former assets are still in receivership.
Rob Kluge, senior managing director at Current Real Estate Advisors, said the banking crisis is likely to throw cold water on office deals across industries as companies are more cautious with their money.
“The government and the still-standing banks have done a good job cauterizing the run on the banks and protecting the institutions, but what they’re not cauterizing is the lack of confidence in tenants in the market,” he said. “This is really very nerve-wracking and it directly affects the banking where people get their money from. It’s obviously a slight contagion effect.”
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