OppenheimerFunds, the mutual fund management firm, is probing the market for between 200,000 to 250,000 square feet sources say.
The firm, which is a subsidiary of the Springfield Massachusetts based life insurance company MassMutual, currently has a similarly sized block of offices in Two World Financial Center.
Stuart Romanoff, an executive at the real estate services firm Cushman & Wakefield, is leading the company’s search for space. Romanoff couldn’t be reached for comment, but he is said to be shopping OppenheimerFunds’ requirement to the long list of large vacancies around town even though the company has a few years left on its World Financial Center lease.
It is an advantageous time in the market for tenants of OppenheimerFunds’ bulk. Although deal activity has picked up in recent months, large blocks of vacancy and abundant amounts of sublease space have kept rents slack for tenants in the market for a large lease.
The market for big space users to some degree contrasts the position that small and medium sized tenants in the market for space are facing.
While landlords were eager to sign cut-rate deals when lease activity plummeted at the start of the year, real estate experts say that owners are becoming less eager to doll out bargains now that more tenants have moved in to capitalize on the depressed market.
Big tenants however remain highly coveted. The shakeup in the financial industry last year caused many of the city’s biggest space users to cast off pieces of their office portfolios, putting a drag on landlords offering large spaces directly.
The spaces have lingered because many big tenants are out of the market, have put off real estate decisions to focus on their business amid the tough economic times or have been wooed to stay in place by their existing landlords.
Landlords are especially eager to cater to these tenants because of the huge implications they can have on a building’s financial position. Landing a big tenant, or losing one, can open or close a spigot of income for a property at a time when in place cash flow is considered an essential lifeline to accessing any type of mortgage financing or working capital.
For a tenant like OppenheimerFunds, a landlord would likely offer the company aggressive rents and generous incentives such as periods of free rent and work allowances that would cover at least part of the cost the company would incur outfitting a new space with an office installation.
Still, many real estate experts familiar with the downtown office market predict that Brookfield Properties, a real estate investment trust that owns a majority interest in the World Financial Center, will push hard to hold onto OppenheimerFunds. The company seems as if it would be especially eager given the prospect of large vacancies at the complex.
It appears that Merrill Lynch, one of the World Financial Center’s largest tenants, will vacate at least a portion of the more than two million square feet it leases there when its lease expires in 2013.
Another large tenant, the accounting and financial consulting firm Deloitte & Touche, which occupies hundreds of thousands of square feet, is also said to be exploring an exit from the complex when its lease runs out in the next few years because it wants to consolidate operations with offices it has in midtown.
Landlords often have an advantage in retaining tenants from competing landlord who would like to whisk them away. If an existing landlord can reasonably match what is available to a tenant elsewhere, many tenants usually opt to stay put because of the cost and inconvenience of moving.
Although some lease renewals seem close to preordained, tenants like OppenheimerFunds’ venture out to explore the market nonetheless in order to gauge the available opportunities brokers says.