Printer Friendly

Chemical + MHT = empty space.

Chemical + MHT = Empty space

When two of New York's mightiest banking powers announced last week they would merge, area realtors cringed at the thought of more vacant office and retail space. Meanwhile, the city lamented the loss of about 6,200 jobs.

As part of the joining of Chemical Bank and Manufacturers Hanover Trust, Chemical will be vacating its offices at 277 Park Avenue and some back office space -- estimated at more than 1 million square feet. In addition, about 70 retail bank locations, mostly in Manhattan, will close.

The union between the number one and the number three bank in New York is a cost-saving measure -- about $650 million anticipated -- as both banks have been hurt by bad loans in recent years -- Chemical mostly to real estate and MHT mostly to developing nations. The combined assets of the bank will be $135.5 billion. In addition to 40 percent of the consumer deposits in the metropolitan area, the new entity holds about $10.2 billion in real estate loans -- $6.7 from Chemical and $3.5 from MHT. $1 billion of Chemical's loans are said to be delinquent and the bank brings $544 million in foreclosed property. Manufacturers has $385 million delinquent.

Retail Reaction

"Everything that becomes available today has a significant impact," said Edward Friedman, president, Newmark Realty Services, which was already disposing of a branch for Chemical at 60th and Lexington.

The branch closings by both banks are expected to occur mostly in Manhattan where MHT has 61 branches and Chemical has 72. According to one retail banker when banks merge they close branches where street."

There is a "tremendous" supply in the market, said Friedman, making the locations given up by both banks harder to rent.

Some of the branches, he said, are "bank" locations, meaning the spaces have built in such a way that would only be useful to a bank. Friedman said it is hard to give an average size of a branch as they vary greatly.

The reduction in the number of branches, he said, has been a trend for some time now. Banks have also been "desponding, he said, in the amount they lease for a branch. "Today they've really downsized the branches in many cases," he said.

Friedman classified the events of the merger a "big step back" for a retail market burdened by oversupply. Retail vacancy rate in the 53-block Grand Central business district has been put at 11 percent. With sublets and stores leases expiring and tenants not renewing, the rate is probably a bit higher, said Friedman.

One retail pro, however, said the branch closings may present some opportunity because they are in excellent locations. They are not, as he said, "dead weight."

"The availability of those branches might infuse leasing activity, said Ben Fox, vice president, New Spectrum Realty.

"Good market or bad, retailers do not pass up good locations...Those are not dubious locations," said Fox.

According to this realtor, there is a misconception that there is a poor retail market out there. In most of the main shopping streets of midtown and downtown Manhattan -- Fifth Avenue, Sixth Avenue, Lower Broadway and others -- he said, there are few vacancies.

Office Outlook

While the new bank will bear the Chemical name, Chemical will move out of its headquarters at 277 Park Avenue at 48th Street, which it leases until 1994, and move across the street to MHT's home. Chemical will leave behind them close to 1 million square feet.

The opening of this space will have an impact on all Midtown markets which are fighting for the few tenants there are today, said Maurice Solomon, vice chairman and manager of the midtown Manhattan office of Julien J. Studley, Inc.

A lot of new buildings searching for tenants, Solomon said, may think they have a tenant and then a new large block of space opens up and the tenant may be lured away. With some improvements, Solomon said, the Chemical building is a very viable space.

Solomon said this is a "very strange world" we live in where some recent significant leases have not done anything to lessen the market's burden. Solomon cited the recent deal between Sony USA and AT&T in which Sony will lease the 35-story 550 Madison. While large, Solomon said, the space was built for the user and was never marketed as vacant space. "We've never considered that inventory," he said. Therefore, the deal did not make a dent in the vacancy rate.

The merger, Solomon said, is indicative consolidation movement that is hitting most industries -- banking, investments, law to name a few. CBS is also going to be vacating space on 52nd Street. Some advertising agencies are getting new accounts and moving to larger spaces, he said, but there is no real buoyancy in the market. The junk bond explosion of the last decade, Solomon said, led to a great number of new jobs.

"What's going to make New York hire a bunch of people," Solomon said.

Silver Lining

Arthur Mirante, president and CEO of Cushman & Wakefield, said, in the short term, the merger is clearly "a negative for the marketplace." Mirante said he is not worried about the leasing of 277 Park Avenue in the next few years, but the downtown Class B branch and office locations will be harder to lease and cause a drain on the market.

However, he said, "I really believe in the interim and long-term this is a benefit."

With all the sour publicity New York City has been getting, he said, this and other mergers -- currently being explored is the joining of Chase Manhattan Bank and the Bank of New York -- will lead to strong, lean institutions and the rebuilding of that power base for the city.
COPYRIGHT 1991 Hagedorn Publication
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Chemical Bank-Manufacturers Hanover Trust merger will result in additional vacant office space
Author:Fitzgerald, Therese
Publication:Real Estate Weekly
Date:Jul 24, 1991
Words:962
Previous Article:Prudential named 'good neighbor.' (award for new executive headquarters in Parsippany, NJ)
Next Article:Court OK's chapter 11 for personal bankruptcy.
Topics:


Related Articles
Designing a new generation of space.
Corporate exec turns consultant.
Chemical Bank seeks to dispose of space.
Bank gets bonus in moving operations.
Nelson Construction and Development Corp. has named Coldwell Banker Roohan Realty to head its marketing program.
Retail brings life to bank space.
Bank merger to affect space needs.
Survivor instinct: how a strategic executive read all the corporate signs-and played her vantage points.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters