By JAMES FINK
jfink@bizjournals.com | 716-541-1611

Downtown Buffalo's Canal Side development has emerged as the latest option for HSBC Bank USA in its quest to potentially find a new headquarters location in the city's central business district or elsewhere in the region.

Sources said the bank is considering expanding its 20-year-old HSBC Atrium building on Washington Street and taking significant portions of the Webster block - a surface parking lot in front of HSBC Arena - for its downtown campus. It could occupy as much as 650,000 square feet and house more than 4,000 workers.

Canal Side is one of eight locations under consideration. HSBC currently has 2,300 workers in 653,000 square feet in the HSBC Tower. The bank's lease is due to expire in 2013. It hired Jones Lang LaSalle to consider its options, including remaining in HSBC Tower.

The Webster block also is being considered as a possible hotel site and for other Canal Side-related developments. The 10-acre parcel is about to be sold by the City of Buffalo to Erie Canal Harbor Development Corp. for $7.5 million.

The HSBC lease and that of Phillips Lytle law firm - whose lease is also expiring in the 38-story, downtown Buffalo tower - are two of the most coveted in the region. Both are attracting incentive-laden offers.

Thomas Dee, Erie Canal Harbor Development president, acknowledged that HSBC is considering the Atrium expansion in the Canal Side footprint.

"If that could happen and we could bring those extra jobs to downtown, it would increase the critical mass for the city and that would be a wonderful thing," Dee said.

Neil Brazil, HSBC vice president of public affairs, said any speculation about a new downtown site for the bank is just that - speculation.

"As part of standard business practice, HSBC has initiated a RFP process to review how its future real estate requirements in Buffalo will best be met. The company is currently looking at a range of options, one of which is to maintain the status quo. A final decision is not expected for some months."

Other sites being considered are:

• A 10-story building adjacent to HSBC Tower that would be developed by Seneca One Realty LLC.

• Developer Gerry Buchheit presented an offer to the bank to renovate the former Freezer Queen property on Fuhrmann Boulevard into a Class A historic restoration. Phillips Lytle is being courted, as well.

• Carl Paladino proposed his Court Street Tower project as a possible location.

• Ciminelli Development Co. offered land in its Muir Woods property in Amherst.

• Uniland Development Co. pitched property in CrossPoint Business Park, also in Amherst.

• HSBC could downsize its local operations and shift workers out of the region.

A final decision by HSBC Bank and Phillips Lytle is due this fall.