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

While HSBC Bank USA continues to review real estate options for its downtown Buffalo headquarters, the Buffalo Common Council has agreed to grant the financial institution a new extension for the so-called Webster Block.

On Tuesday afternoon, the council unanimously approved the 90-day extension requested by Brendan Mehaffy, the city's economic development pointman. In August, the council agreed to give HSBC Bank or its designated developer, Benderson Development Co., an exclusive option for the Webster Block. The agreement was extended in late December and was due to expire March 31.

The latest extension runs until June 30 and was done at the bank's request.

"As we continue to review options, we have requested a 90-day extension to the Webster Block land-transfer decision," confirmed Neil Brazil, HSBC Bank USA vice president of public affairs.

HSBC Bank is considering several options for its downtown Buffalo offices, including remaining in its present home at One HSBC Center or possible building designs for the Webster Block.

HSBC retained the Chicago firm of Wright Heerma Architects to design options for the latter, ranging in size from a six-story, 310,000-square-foot building to a 10-story, 407,000-square-foot building. Those would be connected to the HSBC Atrium. A planned 2,500-car parking garage also may be part of the project.

HSBC currently leases 653,848 in One HSBC Center but its lease is due to expire in late 2013. The deal is being closely watched by local leaders, as well as the real estate and economic development communities.

The bank accounts for nearly 77 percent of the center's 851,915 square feet. Its decision will signal its long-term plans for Buffalo. One scenario has the bank adding jobs. It currently employs more than 4,000 locally, including 2,200 downtown.

If the bank leaves the 38-story tower, many fear the possible effect on downtown office space.

Industry sources say building owner Seneca One Realty LLC, a New York City real estate investment group, may offer the HSBC space at deeply discounted rental rates. That could start a downtown real estate shuffle as tenants leave other buildings for One HSBC Center.

The bank is reportedly working with a number of economic-development agencies including Empire State Development Corp., the Erie County Industrial Development Agency and New York Power Authority on incentive packages related to the site search.

HSBC's presence on the Webster Block, however, could be a boost for the Canal Side development effort that would neighbor the building. An influx of workers could attract the attention of retailers and restaurants being courted by Erie Canal Harbor Development.

Sources said one option may see the bank build on the Webster Block but keep some functions in One HSBC Center.

Buffalo Mayor Byron Brown said he hopes HSBC will keep its offices there and expand in the tower.

Another tenant of One HSBC Center tenant, Phillips Lytle LLP, is conducting its own site search. The law firm leases 86,288 square feet and its lease expires in December 2013.

Firm leaders say it is considering several options: moving into the vacant Gen. Donovan State Office Building on lower Main Street, anchoring a proposed building at the corner of Main and Swan streets or anchoring a proposed building on South Elmwood Avenue behind New Era Cap Co.'s headquarters.

David McNamara, Phillips Lytle managing partner, said the extension for HSBC will not affect his firm's decision-making process.

He said there has been no vote scheduled by partners yet to address its future real estate needs.

"We are pressing forward with the process," McNamara said.

"We hope to conclude it in the fastest time frame possible, regardless of HSBC's schedule."