A developer warned Tuesday of a catastrophic impact on the city's downtown office market if HSBC Bank USA leaves the city's tallest building when its lease expires in October 2013.
Also Tuesday, the Common Council voted, 8-0, to give HSBC more time to consider building an office complex on Buffalo's waterfront.
Rocco Termini, president of Signature Development, predicted the bank's expected announcement early next year that it will leave One HSBC Center will lead to the building's foreclosure. And after it is sold "for pennies on the dollar," it will set off a chain reaction, with commercial tenants in Class B office space moving in droves into what was Class A space, at a comparable cost.
"I think if you see the HSBC building empty out, and I think it's going to happen, you are going to see a real estate tsunami happening in Buffalo," Termini told 80 people attending a lunchtime talk in the Central Library.
"Everyone will want to go from B to A space. I think everybody who owns real estate downtown recognizes this danger. It's going to be a major problem."
That effect, he warned, could severely impact historic buildings downtown and result in lower assessed values of downtown real estate as tenants head for the reduced-priced, 38-story tower.
"You'll see all those great architectural buildings emptying out. And the real problem will be, what do you do with these architectural treasures of Buffalo?" Termini said.
The Common Council's decision allowed for a 60-day extension of the bank's option on the waterfront parcel known as the Webster Block at the foot of Washington Street.
Some city officials and business leaders in recent weeks have raised concerns that a move by the bank -- the city's largest private-sector employer, with 2,227 based in the tower -- could be a crippling blow to the downtown office market.
Mayor Byron W. Brown outlined these concerns in a letter he wrote earlier this month. Still, Brown supported the extension, saying that giving the bank more time to evaluate its options is "about preserving 4,000 jobs," a mayoral spokesman said.
But if HSBC moves to the Webster Block, which is part of the ongoing Canal Side development, it would be devastating to the downtown real estate market and to the waterfront, some preservationists and other critics have warned.
Losing the jobs would cause far worse consequences, Council Majority Leader Richard A. Fontana countered.
"It's even more devastating for [HSBC] to move out of that tower and move to another city, or another state or another area of Western New York," Fontana said. "That's even more devastating. What we want to do is keep these jobs in downtown Buffalo."
That view is shared by developer Carl Paladino, even though he conceded the bank leaving the tower "is going to have a bad effect."
"God forbid if they move out of downtown. The big thing is keeping all those jobs downtown and keeping HSBC downtown," Paladino said. "If [moving to the Webster Block] is the way they stay downtown, fine, because we can't afford to move them. And if we keep them really happy, they might expand their jobs here."
Jordan Levy, chairman of the Erie Canal Harbor Development Corp., has said repeatedly that keeping HSBC downtown is the agency's overriding concern.
The bank occupies 653,000 square feet in the tower, where it is the building's biggest tenant. That's about 10 percent of all Class A office space downtown. But the bank has indicated that the building's layout is no longer conducive to its needs.
Two weeks ago, the mayor asked the Buffalo Niagara Partnership to establish a steering committee to make short- and long-term recommendations regarding what to do about the excess of downtown commercial office space.
Andrew J. Rudnick, the partnership's chairman, said the steering committee -- with the working title Buffalo Building Reuse Project -- has begun working on an overall strategy to strengthen downtown's commercial core. Rudnick also said there are "a lot of ifs" in Termini's prediction.
"I think the worst-case scenario is it's more shuffling of office tenants from one set of buildings to another," he said.
Termini said that while HSBC's lease does not expire for nearly three years, the impact will shadow the announcement.
"What will happen is that tenants in these buildings won't renew their leases? It will start immediately," he said.
News Staff Reporter Brian Meyer contributed to this report.