Financial firms sublease space starts to add up.

Rumors are percolating about just how much sublease space is going to hit the market as financial firms begin to cut their labor forces and downsize their offices while licking their sub prime wounds.

The subject of market meetings at the city's largest brokerage firms, sources familiar with the speculation say that the financial sector is now finally getting ready to release at least a handful of large blocks.

Despite the financial industry's succession of major write-downs beginning in the latter half of 2007 after investing in risky mortgage backed securities that have gone bad and getting caught up in the swirl of credit problems that followed, the upcoming blocks of sublease space would be among the first to be shed.

In recent months, HSBC dumped a 250,000 s/f block of space at its tower on Fifth Avenue and Citigroup shed a smaller 75,000 s/f space at 666 Fifth Avenue.

The cutbacks had been so modest that brokers had begun to forecast that there wouldn't be any major divestiture of space at all because financial firms had learned their lesson from the previous down cycle in 2001 when they went through the costly process of cutting space only to have to lease it back at far higher rents after the economy improved.

Brokers say that JPMorgan Chase, flush with new space since acquiring Bear Stearns at what appeared to be the epicenter of the credit crunch in March, will shed up to 1 million square feet on Park Avenue, where the firm has the bulk of its offices, including its world headquarters at 270 Park Avenue.

That's because JPMorgan is planning to cut Bear's staff and fill Bear's headquarters tower at 383 Madison Avenue with its own, likely releasing space near by, like at 277 Park Avenue and/or 345 Park Avenue. Bear's ancillary offices at 237 and 320 Park Avenue will likely also be cast into the market. The firm had at least 250,000 square feet between the two buildings.

Nearby, UBS--fresh off of raising $15 billion to pump cash into its decimated coffers--is also rumored to be planning a sublease at 299 Park Avenue, although brokers don't know yet how large. Lehman Brothers is also said to be looking to dump space at 399 Park Avenue or 605 Third Avenue and also part of the huge 400,000 s/f block of sublease space that the firm took last year at the top of 1271 Avenue of the Americas. MetLife is said to be looking to sublease a handful of floors--a broker told us that the firm could release three floors--at 1095 Avenue of the Americas, the Bryant Park office tower in which the insurance giant took over 400,000 s/f at the end of 2006 for rents around $90 per square feet, stratospheric at the time for such a huge block of space.

Unrelated to the subprime problems, Avon is apparently looking to leave the city altogether when its lease comes due at 1251 Avenue of the Americas.

Although the focus clearly appears to be on firms cutting space rather than taking large leases, brokers tell us that a handful of big tenants are in the market for large leases right now.

The French bank Natixis has been searching for space for months and its name keeps coming up as a possible ten ant in 11 Times Square, the office tower being built on speculation by SJP Properties at 42nd Street and Eighth Avenue. The firm is said to be looking for around 250,000 s/fin the city and a few hundred thousand feet more for back offices in New Jersey.

Lower cost options that Natixis has apparently been looking at are the HSBC sublease space at 452 Fifth Avenue, the old New York Times building on 43rd Street and World Wide Plaza.

NBC is another huge tenant that is beginning to poke around the market for a new home. The network is currently has 21 floors in 30 Rockefeller Plaza, but will take its 600,000 s/f elsewhere, brokers say, because the building's rents are too high to renew.