JPMorgan Chase WTC Development Plans in Doubt
- May 15, 2008
Has JPMorgan Chase finally backed off on plans to build an office tower at the World Trade Center site in lower Manhattan? That may be happening despite word two months ago that the Wall Street giant would still develop a skyscraper on the site of the former Deutsche Bank building even though it had agreed to acquire troubled Bear Stearns and its Midtown office tower and trading floors at 383 Madison Ave. JPMorgan Chase officials had reportedly assured the Port Authority of New York and New Jersey, lead agency for the World Trade Center redevelopment, that it would develop the Tower 5 site for something other than a new investment banking headquarters. Doubt has been cast on that plan this week. Reuters reported today that JPMorgan Chase CEO Jamie Dimon talked about a glut of office space during a UBS AG investors’ conference Monday. Dimon told the attendees that JPMorgan Chase expects to have to sell or sublease about 1 million square feet of the 4 million square feet of space it will get in the Bear Stearns merger, according to reporting by Joseph Giannone and Joan Gralla. Dimon was quoted in the Reuters story as saying, “This stops us from having to basically spend $3 billion to build an investment banking headquarters Downtown.” Last year, JPMorgan Chase had announced plans to spend at least $2 billion on a 1.3 million-square-foot tower on the Tower 5 site at a redeveloped World Trade Center. The bank planned to locate its investment banking headquarters there, including large trading floors. JPMorgan Chase now plans to put the investment banking HQ in the Bear Stearns building. A spokesperson for the Port Authority could not be reached by CPN before press time today. But Reuters reported this morning that the Port Authority had not been informed of any new decisions by JPMorgan Chase. Robert Sammons, director of research for Colliers ABR, told CPN today he had also heard JPMorgan Chase expected to give up about 1 million square feet of space following the Bear Stearns acquisition. He said it would likely “come out of one of the Midtown towers.” Sammons said he had been surprised when JPMorgan Chase said several months ago it still planned to go ahead with the Downtown Manhattan tower. “We had written it off, but they claimed they were going to do it anyway.” If JPMorgan Chase does go ahead with the Tower 5 development, Sammons said there “would be benefits in the long term” from building Downtown. With Hudson Yards being delayed, the World Trade Center development will be among the few new office buildings in Manhattan coming on line in the next few years, Sammons said. Looking ahead to the rest of 2008, Sammons said Manhattan vacancy rates could climb to between 10 and 11 percent, numbers not seen since right after 9/11. “We’ll see some additional space come on the market from financial services firms,” he said. “That will ricochet to other firms that deal with those firms on an ongoing basis.” If JPMorgan Chase backs out of the tower development in Lower Manhattan, it will be among several developments in the city facing delays or being put off. Tishman Speyer has pulled out of its plan to develop a mixed-use project at the Hudson Yards on Manhattan’s Far West Side because both sides couldn’t come to agreements on rezoning. The Metropolitan Transportation Authority, which owns the rail yards, has said it will re-enter discussions with other interested developers. Meanwhile, Forest City Ratner Cos. is moving ahead with construction of a $950 million sports and entertainment complex in Downtown Brooklyn but has put off the office and residential component of the $4 billion Atlantic Yards project. News of the possible Downtown pullout by JPMorgan Chase comes at a time when office vacancies are beginning to creep up in Manhattan, particularly in Lower Manhattan. Colliers ABR Inc. stated in its April market report for Manhattan that “the weakest link” for the month was Downtown, where the Class A vacancy rate jumped to 5.9 percent from 4.4. percent in March. The increase was due to two large subleases–the 599,000-square-foot building at 77 Water St. that Goldman Sachs was giving up in consolidation efforts and the 142,600 square feet at 7 World Trade Center that ABN Amro was giving up following its acquisition by the Royal Bank of Scotland. Overall, the vacancy rate for Manhattan also rose in April, up 60 basis points to 6.3 percent and the highest figure since a 6.5 percent vacancy rate in November 2006, according to the Colliers ABR report. Among the firms giving up space in Midtown, where the Class A vacancy rate reached 6.5 percent, was Citigroup, which returned 215,000 square feet of space at 153East 53rd St.