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It has been just over a month since the failure of Silicon Valley Bank on March 10, 2023 shook the banking system and rattled financial markets. Since then several additional banks have also closed (including Signature Bank) or were forced to consolidate with other banks to avoid potential failure (Credit Suisse). Another financial institution, First Republic, was the recipient of a rescue bailout by other major banks including JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Truist.

The turbulence in the banking system is of great concern for CRE, which has already been struggling amid shrinking and increasingly expensive access to capital as well as recent loan defaults especially in the office sector. It has also been revealed that many banks, especially regional ones, have increased their exposure to CRE over the last several years and according to Trepp, Signature Bank in particular was a significant holder of CRE debt, especially in the New York City area. Maverick Real Estate Partners recently analyzed the composition of Signature’s New York City loan portfolio in depth and found that there are roughly 250 loans on office properties held by Signature Bank in the New York City area totalling $3 to 3.5 billion in debt.

Beyond these substantial issues, the failure and struggles of these banks, is putting thousands of square feet of active office square footage at risk, as covered in the Commercial Observer article, Banking Crisis Expected to Add to Manhattan, San Francisco Office Woesusing CompStak’s data yesterday. In this week’s blog, CompStak takes a closer look at the current office footprint of Credit Suisse, Silicon Valley Bank, Signature Bank, First Republic and Silvergate Bank, these companies’ lease expirations and the landlords and markets that have the most exposure to these tenants.

New York City Has The Largest Office Footprint Among these Troubled/Failed Banks

According to CompStak’s data, New York City has the largest total active leased office square footage across these banks evaluated, followed by San Francisco. Across all the active leased square footage, more than 77% of active square footage was leased before the pandemic began. Even excluding the 1.2 million square feet Credit Suisse occupies at the 2.3 million-square-foot 11 Madison Avenue, more than 67% of square footage was leased prior to the pandemic. Notable post-pandemic leasing activity included First Republic Bank’s 156,000-square-foot renewal in 3Q 2022 for their space in Century City as well as Signature Bank’s expansion at 1400 Broadway completed in 1Q 2022 for 168,000 square feet. 

Overall, CompStak’s data shows that Credit Suisse is the largest leaseholder among these banks, with the bulk of the space concentrated in the New York City market, followed by First Republic Bank’s footprint in second place. The most valuable footprint overall (by term remaining, leased square footage and rent in place) is Credit Suisse’s leased space at 11 Madison Avenue—the bank completed a 1.2-million-square-foot renewal in 2014 for an additional 20 years of term. While UBS has agreed to acquire Credit Suisse, the future of its leased real estate remains in question. Other high ranking buildings for outstanding lease value from these banks includes First Republic’s footprint at 1 Front Street in the North Financial District submarket in San Francisco and 410 Tenth Avenue in New York City’s Hudson Yards submarket, where the bank executed a 212,000-square-foot lease in 2Q 2019.

2035 Through 2037, Followed by 2023 Through 2025 Are the Peak Periods for Lease Expirations 

From 2035 through 2037, more than 1.7 million square feet will expire across these banks, boosted largely by the substantial footprint held by Credit Suisse at 11 Madison Avenue. After this period, the next three years (2023 through 2025) hold the next highest total of lease expirations, with the bulk (60.5%) expiring in San Francisco and the Bay Area and from First Republic.

SL Green and PGIM Hold the Highest Amount of Leased Square Footage Across These Banks

Credit Suisse’s lease at 11 Madison Avenue, jointly owned by PGIM and SL Green, means that the two landlords have the most active leased square footage among these challenged banks. The second most exposed landlord by square footage leased by these banks in New York City is Empire State Realty Trust, who leases space to Signature Bank at 1400 Broadway. On the West Coast, landlords holding significant First Republic leases include Honorway Investment Group, owner of 388 Market Street, and Paramount Group, 1 Front Street’s owner. In addition, CommonWealth Partners owns 1889 Century Park East in Los Angeles, where First Republic recently signed a large renewal for 156,000 square feet in April 2022.

While it is not exactly known what will happen exactly to all the current leases in place by these banks, it seems reasonable to assume that some amount of the space may be terminated, consolidated, or subleased. Since New York City and San Francisco hold the most lease exposure, this is of concern as these markets have already been challenged by waning demand and sublease additions from another industry—the tech sector— especially in recent months.

Interested in learning more about office space across the county?

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