Fidelity Investments, which has been retrenching its office space locally, negotiated a 280,000-square-foot lease buyout at 99 High St. in Boston earlier this spring. Merrill Lynch Co. has been mentioned as one of the suitors to take over the space.

Even as it maneuvers out of office lease obligations in downtown Boston, Fidelity Investments is apparently beefing up its commercial real estate activities in Utah and North Carolina. According to industry sources, the mutual fund giant is nearing commitment on a major build-to-suit project in Salt Lake City and is simultaneously conducting a search for commercial space in the Raleigh-Durham area of North Carolina.

Cheaper living costs for employees is driving Fidelity to investigate potential options in North Carolina, claimed one real estate broker familiar with the firm’s interest in that market. The source maintained that Trammell Crow Co. of Boston has been retained to conduct the search, although it is unclear exactly how much space Fidelity is seeking or what the timetable may be on the effort, with Trammell Crow Co. officials referring calls on the matter to Fidelity.

Across the country, Fidelity has had a presence in Salt Lake City since the mid-1980s, and currently has more than 1,100 employees there even after two recent rounds of layoffs from that labor pool. Sources said Fidelity is looking to consolidate its operations into a build-to-suit property in downtown Salt Lake City, just around the corner from the renowned Mormon Tabernacle complex.

Although details remain sketchy, one source estimated that the new Utah facility will exceed 100,000 square feet and could be closer to 200,000 square feet. Were Fidelity to move all 1,100 employees into the new property, the industry standard of 200 square feet per employee would equate to a need for 220,000 square feet.

At this point, there is little to discuss, according to Fidelity spokesman Vincent Loporchio. “We constantly are evaluating our space needs, and we are doing so currently in Raleigh and Salt Lake City,” Loporchio said last week. One issue being looked at, he explained, is whether Fidelity can consolidate two operations in Raleigh-Durham and two in Utah into a single facility in each market. To date, however, “no final decision has been made” in either case, Loporchio said, even though one source claimed Fidelity has selected a site for the Utah property. “I wouldn’t be able to speculate on that right now,” was all Loporchio would say about the Salt Lake situation.

Utah is just one of several markets where Fidelity has made substantial inroads during the past decade. The firm is also active in such areas as southern New Hampshire, Dallas and Covington, Kent., an emerging region near Cincinnati, Ohio, where Fidelity established a major beachhead in during the mid-1990s.

After several years of expansion outside the Bay State, including a sprawling campus in Smithfield, R.I., Fidelity has been generally retrenching in the wake of the financial services woes experienced nationally since mid-2000. Fidelity’s biggest hit occurred last autumn when it laid off nearly 1,700 employees, about half of which were located in Massachusetts. That cost-cutting move reduced the company’s overall workforce by just over 5 percent.

Boston Market

Having been Boston’s prime driver for space during the past decade, the financial services industry’s prolonged woes have had a serious impact on the Hub’s office market fundamentals. Fueled largely by the addition of several thousand square feet of sublease space to the office supply inventory by financial services concerns, Boston’s availability rate reached 19.1 percent during the first quarter of 2003, according to Richards Barry Joyce & Partners.

Recognizing the length of time it might require to find a taker for its space, Fidelity has been proactively pursuing buyouts of its downtown office leases. The firm, for example, negotiated a buyout of some 280,000 square feet at 99 High St. earlier this spring, paying an estimated 92 cents on the dollar to the landlord, a partnership of Walton Street Capital and Westbrook Real Estate. Fidelity is supposedly now doing a workout at 100 Summer St. in space that will be taken over by the Nixon Peabody law firm.

“It’s a smart approach,” one Boston broker said, maintaining the buyouts should enable the overhang of supply to work its way through the pipeline quicker, as well as prevent rental rates from falling too dramatically. According to sources, Merrill Lynch Co. is negotiating to take over the space left behind by Fidelity at 99 High St.

Although it may lead to some tightening of the market, Fidelity’s retrenchment would also seem to offer a level of concern for landlords who saw the city’s financial services base as a long-term engine of growth. Significant blocks of space remain at such properties as 470 Atlantic Ave., 3 Post Office Square and One Winthrop Square, while Congress Group Ventures and Lend Lease Real Estate Investments are fast approaching delivery of 33 Arch St., a new downtown Boston office tower that will yield 600,000 square feet early next year, none of which is presently leased.

In the meantime, it does appear that Fidelity is keeping its options open in other markets such as Utah and North Carolina. The latter region has become a particular thorn in New England’s side in recent years, with officials there aggressively promoting the so-called Research Triangle area as a Mecca for a range of sought-after industries, including biotechnology, telecommunications and financial services.

Joe Clements may be reached at jclements@thewarrengroup.com.