Deloitte Asks Incentives for Downtown Move

NEW YORK CITY-At its regularly scheduled public hearing Thursday, the New York City Industrial Development Agency will consider Deloitte LLP’s application for up to $21 million in benefits on its pending lease of as much as 630,000 square feet at Brookfield Properties’ 4 World Financial Center. Although Brookfield did not respond to GlobeSt.com’s inquiries by deadline, a Deloitte spokesman tells GlobeSt.com that "economic incentives are an important factor that must be considered when weighing our options."

The IDA application, the spokesman adds, "pertains to one such option. Negotiations with landlords are continuing during this phase of our search. At this stage, no final decisions have been made and no deals have been signed." Meanwhile, a report from the Alliance for Downtown New York cites the pending Deloitte lease as being among those that are “expected to be finalized soon.”

According to a cost/benefit analysis conducted by the IDA, the return to the city on the $21-million benefits package could be substantial. It estimates $535.6 million in additional tax revenues over the course of 17 years.

The IDA incentives, which include at least $10.6 million in tax breaks, would be fully realized only if Deloitte increases its overall New York City employment by up to 2,100 new positions. Accordingly, the additional revenues for the city forecast by the IDA would only materialize if the Big Four accounting firm adds or relocates the full complement of 2,100 jobs to the tax base. Deloitte currently employs 4,211 personnel in Manhattan.

According to IDA documents, Deloitte notes that it is “currently assessing options” for its metro area real estate strategy, “including the evaluation of existing office locations in New York, New Jersey and Connecticut.” The 4 WFC deal would entail Deloitte consolidating its headquarters facility and business operations there while accommodating future growth. It would house the New York City offices of all Deloitte US firms.

Currently, Deloitte’s Manhattan headquarters are at 1633 Broadway. It also occupies 130,000 square feet at 25 Broadway and a total of more than 500,000 square feet at 1 and 2 WFC, much of it subleased from Bank of America Merrill Lynch.

Deloitte says in its IDA application that a total of 2,100 new jobs could be created by the end of 2022, five years after it completes the consolidation of operations at 4 WFC. That would be in addition to the 4,211 jobs currently based in Midtown and Downtown.

As such, Deloitte proposes to lease 390,000 square feet at 4 WFC in two tranches of 110,000 and 280,000 square feet, respectively. Deloitte would have the option of taking an additional 120,000 square feet during this initial leasing period, then take as much as 120,000 more feet “to accommodate an expanded presence as the need may arise.”

However, the firm appears to keep its options open in the IDA application, noting that a portion of the jobs that otherwise would be grown and retained in Manhattan are “the subject of consideration for siting outside of New York.” In New Jersey, Deloitte US firms “have significant operations, including recently expanded, underutilized class A office space.” Similarly, Deloitte has more than 30,000 square feet of “underutilized” office space in Connecticut, and adds that “various other jurisdictions are being considered” for future growth.

The Downtown Alliance report notes that year-to-date office leasing activity in Lower Manhattan is up 28% over 2009. Citing Cushman & Wakefield figures, the report says Downtown's vacancy is lower than Midtown's, and says the submarket currently has about 800,000 square feet of deals that have either been signed in the third quarter or soon will be. "New and pending leases show that Lower Manhattan’s major tenants remain committed to the area while creative services firms are increasingly drawn to it," the report states.