Chase layoffs have brokers dreaming

Real Estate Weekly, Sept 27, 2000 by Natalie Keith

Layoffs as a result of the merger between Chase Manhattan Corp. and J.P. Morgan & Co. will mean more available space in a tight office market, some real estate brokers said.

"It will add some breathing room for tenants so they can make space decisions more easily. They won't have to make them with a gun to their head," said Brian Waterman, Executive Vice President of Newmark & Company Real Estate Inc.

Brokers warn, however, that the layoffs probably won't have a dramatic impact on the market, which is currently experiencing a 4 percent vacancy rate.

"In general the vacancy rate is so-low that you'd have to have massive layoffs to have an effect," Waterman said.

To bring the vacancy rate up to 8 to 10 percent, which is generally considered a healthy rate, there would have to be about 110,000 layoffs. Waterman based his estimates on the assumption that Manhattan has a total of 450 million square feet of office space and, for each worker, there is about 200 square feet of space.

Chase, the third-largest banking company in the United States, recently announced that it had agreed to acquire J.P. Morgan for $30.9 billion in stock. When the merger becomes final, the new firm will be called J.P. Morgan Chase.

Chase has operations in 65 countries and nearly 80,000 employees. Although the company will be moving the bulk of its operations, or 1.2 million square feet, to Jersey City, N.J., it will still have offices in New York.

The merger is expected to result in layoffs through elimination of redundant functions. When news of the merger first became public, some analysts were predicting layoffs of 10,000. At a London news conference last week, however, Chase Chief Executive William Harrison Jr. said the banks would cut as many as 3,000 traders, bankers, and support staff.

The announced layoffs total about 3 percent of the combined staff of 95,000 employees, far less than earlier predictions and the Chase layoffs that resulted from the merger with Chemical Bank. Harrison said there is less overlap between Chase and J.P. Morgan than Chase and Chemical because J.P. Morgan does not have a significant retail banking franchise.

A Chase Manhattan spokeswoman said the companies are seeking regulatory approval for the merger, which will not be completed for some time. She would not comment on how the merger may impact the company's space requirements.

"It's too soon to comment on that," she said.

Brokers said they keep close tabs of mergers because they could mean opportunities for new leasing opportunities, either with the merged company or with other companies vying for the newly available space. This is particularly true in today's market where demand for space is high, supply is low, and no new office buildings are under construction.

"I'm sure the better brokers in the business are already talking to Chase about it," said Stephen Spinola, President of the Real Estate Board of New York. "Right now we've had one of the tightest markets we've ever had. You never like to see layoffs but if it had to happen, now is a good time."

Like other brokers, Marjorie Seaman, President of Seaman Realty & Management Co., Inc., has been keeping track of the merger. She agreed with Waterman, however, in saying that the merger is unlikely to a big impact on space availability.

"From all that I've read arid seen, I don't think there will be a significant change," Seaman said.

She said Chase occupies about a half million square feet of space in downtown Brooklyn, under a deal the company made ten years.

"They have great economies in their buildings. I just can't imagine them giving back any of that space," she said.