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

In the wake of First Niagara Financial Group's decision to purchase 195 branches from HSBC Bank USA, there are questions swirling about real estate and economic development.

It clearly is a positive for the region as many hope First Niagara's continued growth will result in the bank increasing its space needs in the Larkin District, also known as Larkinville. First Niagara is clearly the district's anchor tenant.

"We'd love it to be in Larkinville," said John Koelmel, First Niagara president and chief executive officer, referring to future expansion. "We are absolutely committed to this neighborhood."

The bank has 387 workers in the Larkin at Exchange Building and is in the early stages of moving workers to the neighboring Van Renesslear Street U Building, where another 140 jobs will be created.

"That's the bottom line: You have a major employer expanding and adding jobs in Buffalo," said Robert Schell, president of Pyramid Brokerage Co. of Buffalo. "The region only benefits from that."

Yet, just a few miles away in downtown, there are questions about the fate of the 38-story One HSBC Tower - the city's tallest office building and one that helps define its skyline. The growth of one commercial district and a possible heavy hit to another are not separate economic development or regional issues; they are intertwined.

"There's still this new energy in downtown Buffalo that we've haven't seen in decades," said Erie County Executive Chris Collins. "I think that will help us in the long run."

HSBC is its anchor tenant, but its lease is due to expire in October 2013. The lease has been a source of discussion for more than one year. There are fears that if the bank completely vacates the 853,000-square-foot tower, it will create a large and negative ripple effect in downtown's central business district. HSBC leases nearly 77 percent of the building and has approximately 2,200 workers in the tower.

Many fear a largely empty One HSBC Tower would cause a deflation of rental rates, which would hit owners of older office buildings hard.

"I think this should be a call to action and not a bunch of people sitting around bemoaning what has happened," said Al Culliton, chief operating officer of the Erie County Industrial Development Agency. "We have to start planning for the future."

HSBC's fate comes as the tower's other anchor tenant, Phillips Lytle LLP, announced plans to leave when its lease expires in late 2013 for the soon-to-be renovated Gen. Donovan State Office Building. The law firm occupies 85,000 square feet and has more than 300 workers. Its move is considered crucial to the development that is taking hold in the Canalside area of lower Main Street.

The bank also has more than 400 employees at a back-office mortgage center in Depew, and there are worries that property would be closed or sold.

"We are not moving away from Western New York completely," said Irene Dorner, HSBC Bank regional president. "We are very interested in the future of Upstate."

HSBC is investing several million dollars to renovate HSBC Atrium, which sits several blocks from the tower on Washington Street.

Neil Brazil, bank spokesman, confirmed the Atrium currently has 1,200 workers. Once renovations are completed next year, the number will balloon to 2,000.

"We will not be requiring any additional real estate space," Brazil said.

Dorner, meanwhile, said the bank intends to keep its naming rights at HSBC Arena, which the bank has held since the venue opened in 1996.

Local leaders say until HSBC Bank makes clear exactly what its plans are for downtown, they remain in a holding pattern.

But that doesn't mean advance-strategy work isn't under way.

"I wouldn't call the situation a red flag, but we have to view whatever happens in the tower as an opportunity," Culliton said.

The county executive said One HSBC Tower is loaded with potential, thanks in part to the synergy happening in the Canalside area and other parts of downtown.

"We know, at some point, a lot of the building may be empty and that should be a concern," Collins said. "But it's a quality building with a lot of attributes. There is an answer."