Wall Street could soon become a home office and a computer.
The big brokerage firms and banks that are headquartered in New York City aren’t going to admit this publicly, at least not yet. With the COVID pandemic waning here in the Big Apple, banks have announced that their return-to-work plans will begin roughly after Labor Day, with about half their employees returning to the city by the end of the year, and the rest sometime in possibly early 2021.
Privately, however, bank executives are much more tentative about when they expect to operate at full force, and it’s not just worries about a second wave of COVID that’s causing this reassessment.
Like most of Corporate America, the banks did just fine with most of its employees working from home during the pandemic. And banks are brutally efficient at cutting costs — which is why every major bank, whether they admit it or not, is rethinking how many of its people really need to work from an office, and how much rent they have to pay.
The financial sector (banks, securities firms, real estate and insurance) employs around 500,000 people according to the New York State Comptroller’s office, and nearly all the big banks are headquartered in Manhattan. Even a modest shift in employment out of the city could have severe economic implications on top of the ones the city faces with rich people (that is, the people who pay most of the taxes) leaving in droves.
To be fair, Wall Street hasn’t really been Wall Street for a long time; most of the big firms moved from their lower Manhattan digs long ago. They’ve found better real estate in Midtown, or, in the case of Goldman Sachs, a posh new headquarters along the Hudson River just north of Battery Park.
Yes there’s still the New York Stock Exchange, the iconic facade on the corner of Wall and Broad. But inside the beautiful edifice, only a handful of traders remain; most of its stock sales are executed electronically on servers located in New Jersey. The floor of the Big Board has been largely transformed (at least before social distancing) into a studio for financial news.
Technology played a role in this transition — there was no need for firms to be in proximity to the NYSE or each other as paper was replaced by computers, and there was a need for workers to be near major transportation hubs uptown, such as Penn Station and Grand Central.
The 9/11 terrorist attacks also forced the bank chiefs to rethink having so many people crammed into one place. NYSE floor traders have been replaced by computers and algorithms.
But the pandemic and the lockdown of New York City has sparked another transition that had been building for some time. Rents in Midtown have been skyrocketing, while technology has been making working from home easier and more efficient for the past decade.
Bandwidth speeds have increased dramatically (as James Altucher pointed out in his controversial essay about the decline of the city) meaning plenty of Wall Streeters could work from their Hamptons home throughout the summer, and many were doing that even before COVID forced them to.
And the firms soon figured out that high-priced bankers weren’t the only employees that could work efficiently from outside the office. People in human resources, public relations, legal and financial advisers have been performing their jobs during the pandemic better than before, bank executives concede.
Financial advisers — working from home — spend less time at the bar, fewer hours at fancy New York City restaurants, and more time helping their clients position their portfolios because Zoom allows them to get down to business without having to dip into an expense account. At UBS, brokers are saying that they doubt they will have to return to their Midtown home before April 2021, if ever.
Does this mean the big New York banks will leave the city tomorrow? No, in fact, real estate will likely be boosted by social distancing procedures that banks and other Manhattan-centric businesses must adopt for their so-called essential employees — think computer programmers who need to be in the office and traders who need technology that can’t yet be replicated on a home computer.
So they can’t simply downsize to smaller offices next month, I am told.
Meanwhile, many bank employees want to come back to work. They miss the camaraderie of the office, and Zoom meetings just don’t do it for every client. “We want to get as many people back as soon as possible,” one senior bank executive told me. “Or we may see a lot of employees getting divorced.”
But social distancing won’t last forever. The post-pandemic city — with high crime and closed restaurants and shops — is a far different, less appealing place to work than it had been.
More importantly bank executives are good at numbers, which are telling them that less travel, unused expense accounts, and smaller, cheaper offices in Manhattan or wherever (I keep hearing Nashville and Denver), means more money for their bottom line. And while traders need to be in the office now, pretty soon a massive order could be done on an iPhone.
And when that happens, Wall Street will really be gone forever.