Later this year, Bank of America (together with the Durst Organization) is set to open the doors to their swanky new Platinum-L.E.E.D-certified office tower in Midtown Manhattan. The project, a ~$1BN project, 50/50 joint-venture between the two organizations was set up with BofA to occupy 1.1 million square feet of the tower, with another ~1m sq ft of office space for other tenants above. Only a very limited amount of space is left, with asking office rents reaching $200 per foot.
When BofA began construction on this tower a few years back, things were looking fan-tas-tic; the economy was recovering nicely from the lows of 2001/2002, the Corporate and Investment Bank was expanding, things were looking up UP UP! Unfortunately, the fates simply had other plans for Kenny Boy and his Merry Men From Charlotte.
From my research, by 2007 Bank of America had roughly 10,000 non-retail banking employees in NYC, +/- a few 'k here-or-there. Since then however, they have lost - through the combination of layoffs and attrition - about 5,000+ of these employees, with rumours that even more will be layed off as soon as this week.
Now, the problems for BofA here are twofold:
- 1. They have a boat-load (technically speaking) of office space to which they are committed for the next 20 years. Among which are 6 high-tech trading floors ranging from ~50,000 to ~100,000 sq. ft. Even with very liberal assumptions as per the density of employees within the space, and the amount of actual "usable" space, BofA has committed to occupying FAR more space than their current (and for the foreseeable future) staffing situation requires. However, due to the lack of new commercial space coming to market, a sub-lease situation could provide BofA with a solid alternative to utilizing ALL of their space, especially given the popularity of the building, the tight Midtown Manhattan office market, the quality of product, quality of tenants who’ve already signed leases (Akin Gump, Marathon Asset Management, HBK Investments), Green elements, and last-but-not-least, its location.
2. BofA received a number of "subsidies" for the construction of this building, many of which have drawn scrutiny from critics. However, some of these subsidies are tied to specific employment numbers, which BofA has to reach by certain dates, lest they forfeit, or are forced to pay-back some subsidies. From Site Selection:
These numbers are faily old (2004, I believe) and could very-well have been re-negotiated. Also, there are other claw-back provisions (see the Site Selection report, link above).
Given these realities, I'm curious whether with BofA as both lessor AND lessee, if "they" have sub-lease or assignment rights per the contracts in-place. Sources in the NYC commercial real estate game whom I've spoke with tend to doubt that BofA would do this, and if not, by my rather liberal calculations, they're going to be sitting on about 100,000-200,000 sq. ft. of empty office space for the foreseeable future, not to mention giving back a few million $'s in subsidies.
On a positive note, any Analysts still stuck around (assuming, of course, any in fact, are) might be getting that corner office alot sooner than they though.