UBS to Vacate Most of Space at Park Avenue Office Tower
UBS AG (UBSN), the Swiss bank that is cutting about 10,000 jobs, plans to move out of almost three-quarters of the space it rents at Manhattan’s 299 Park Ave. as it seeks to reduce real estate costs.
UBS last month listed 382,000 square feet (35,500 square meters) of offices at the Midtown tower for sublease, available in mid-2014, said Robert Alexander, New York tri-state regional chairman for CBRE Group Inc., which is representing the Zurich-based company. The bank, Switzerland’s largest, intends to keep five floors, or about 130,000 square feet, at least until its lease ends in 2018, said two people briefed on its plans, who asked not to be identified because the details are private.
The cutbacks at the 1.2 million-square-foot tower -- known informally as the UBS Building and featuring a large red company logo in its lobby -- are an example of how the biggest investment banks are lowering costs for offices even as they restore profits. UBS this week reported first-quarter earnings of 988 million Swiss francs ($1.06 billion), more than double analysts’ estimate.
The company has “excess capacity, like all financial firms right now,” Alexander said. “UBS is being extremely proactive in managing its bottom line. That’s why they’re doing this.”
UBS intends to put most of its New York-area operations into 1285 Avenue of the Americas, a 1.7 million-square-foot skyscraper six blocks away, and its offices in Stamford, Connecticut, Alexander said. He declined to comment on the future of UBS’s remaining five floors at 299 Park.
The company intends to keep some wealth-management operations at 299 Park while moving its investment-banking department to another location, said another person with knowledge of the bank’s plans.
Karina Byrne, a UBS spokeswoman, declined to comment.
Fisher Brothers Realty Corp. manages the 42-story tower and holds a 51 percent stake. Jody Fisher, a spokesman for the company with Rubenstein Associates, said he had no immediate comment. He isn’t related to the Fisher Brothers family.
UBS sold its 49 percent interest in 299 Park in 2010 for $180 million. The bank late last year signed an extension on its offices at 1285 Avenue of the Americas to 2020, according to Alexander. It now has about 930,000 square feet there.
Availability of top-quality office space in midtown Manhattan is rising and rents have been falling, according to an April report by Colliers International, a commercial real estate brokerage with offices in New York. There were 27 blocks of Midtown office space of 250,000 square feet or larger on the market at the end of March, compared with 22 a year earlier.
Midtown asking rents for so-called class A space were $66.49 a square foot at the end of March, down 5.6 percent from the end of last year’s second quarter, according to Colliers.
For its sublease, UBS is seeking about $65 a square foot for floors 27 through 32, and about $75 a square foot for floors 35 to 41, Alexander said. He said he expects Fisher Brothers to cooperate with prospective new tenants, so they can stay in the space beyond the end of the bank’s lease.
“We’ve got an absolutely fabulous relationship with the Fisher Brothers,” Alexander said. “They’ve been terrific landlords to UBS for 25 years -- partners and landlords -- and they will be cooperative.”
Interest in the space probably will come from small and mid-sized financial firms and consulting companies, he said.
“Park Avenue is very desirable, still,” he said.
Spaces of more than 100,000 square feet represented about 44 percent of the Midtown office market’s total vacancies at the end of last year, according to data from CoStar Group Inc. (CSGP), a Washington-based research firm that tracks office leasing. That’s more than three times the national average and the highest by far of 22 U.S. markets, said Walter Page, CoStar’s director of U.S. office research.
“When you have a lot of large blocks, there’s not too much rent pressure,” Page said. “If people have options, pricing doesn’t get bid up.”
James Emden, a vice chairman at Colliers, said almost all of New York’s largest financial companies are, like UBS, considering reducing their space.
“It really ties into the world of financial consolidation,” said Emden, who doesn’t represent any of the parties involved. “Do we need this much space? Do we need these many people? Which is what’s going on with some of these larger institutions, which don’t need as much with technology today.”
Emden cited Bank of America Corp. as an example. The Charlotte, North Carolina-based bank is giving up most of the offices it inherited when it acquired Merrill Lynch & Co. in 2009, leaving behind a vacancy of about 3 million square feet at lower Manhattan’s Brookfield Place, formerly known as the World Financial Center.
To contact the editor responsible for this story: Kara Wetzel at email@example.com