By Ilaina Jonas and Lauren LaCapra

A potential move by the Swiss bank could be a shot in the arm for New York's economy and would underscore the city's status as the world's key financial center.

A source familiar with the matter told Reuters earlier on Thursday that the bank was considering moving to Manhattan from Stamford, a sea-side town in neighboring Connecticut, although any potential move would not occur until 2015.

"I've been saying for the last 10 years: there is a reason to come to New York," New York City Mayor Michael Bloomberg told a local audience on Thursday.

"I'm not knocking Stamford or any other place, but the competitive proposition in New York ... is that this is the intellectual capital of the world. This is where young people in particular, but also people even my age, want to come," he said.

UBS's move, should it happen, would follow Google Inc <GOOG.O>, which last year purchased a 3 million-square foot building in the trendy Chelsea area of Manhattan.

UBS is looking for 1 million square feet of space, the size of a large office tower. It has hired real estate services company CB Richard Ellis Group Inc <CBG.N> to help with the search for suitable space.

WORLD TRADE CENTER REVIVAL

UBS has looked at the yet-to-be-constructed Three World Trade Center, on the site of the World Trade Center twin towers which were destroyed in the September 11, 2001 attacks, two sources said.

To attract tenants to the World Trade Center site, which many financial firms deserted after the 2001 attacks, the authority is granting tax breaks that can reduce annual rents by $6 to $7 per square foot, another source said.

The average net effective rent -- which factors in incentives usually offered to large commercial tenants -- was $26.23 per square foot in downtown Manhattan in the first quarter, compared to as much as $55.70 in midtown Manhattan, according to real estate services firm Cushman & Wakefield.

UBS has also looked at the nearby World Financial Center, owned by Brookfield Properties Inc <BPO.N> and located further to the west in downtown Manhattan, two sources said.

Some younger bankers and traders who work in the Stamford office, but live in New York City -- some 45 minutes away by train -- have told Reuters they would prefer to have an office closer to home. But others who have homes and families in Connecticut are unhappy about the potential move, they said.

In a statement released on Thursday, UBS said "we routinely evaluate our space allocation as these leases expire and/or space becomes available."

The bank has over 17,000 employees in 3 million square feet of space throughout the New York City area.

UBS's investment bank has struggled to retain talent and has recently seen a number of key dealmakers defect to competitors as the Swiss bank, hit hard by the financial crisis, put curbs on compensation.

(Additional reporting by Dan Trotta)

(Reporting by Lauren Tara LaCapra and Ilaina Jonas; editing by Andre Grenon, Bernard Orr)