Gapper says that "something about financial centres seems to make them
split into different districts" – citing West Kowloon in Hong Kong
and Canary Wharf in London as financial districts which have sprung up as alternatives
to the historic financial districts. In New York, he adds, the pendulum has
started swinging back: while banks seemed to be increasingly moving to midtown
in the 1990s, they now seem more attracted by lower Manhattan than they have
in a long time.
Gapper thinks this all has something to do with cheap rents. I think that there’s
a much more important factor: trading floors.
Canary Wharf was (eventually) a success for one big reason: the City simply
didn’t have enough supply of building sites with big floorplates to meet the
demand for big trading floors. I suspect the impetus for moving to West Kowloon
is the same. And I’m sure that the impetus for moving to lower Manhattan
is the same.
Look where the banks are, in the area. When Goldman moves into its new headquarters,
Deutsche Bank will be pretty much the only major investment bank east of Broadway.
Everybody else – Goldman, Merrill, JP Morgan, Citigroup’s investment bank,
and probably another investment bank or two who will end up moving in to Larry
Silverstein’s new WTC towers – will be in the much more wide-open area
west of Broadway, centered on the 16-acre WTC site. The old WTC only had one
real trading floor, and even that was in Larry Silverstein’s 7WTC rather than
in the Port Authority’sWTC proper. The new WTC site, by contrast, will have
well over a dozen, all told, if you include Goldman’s tower.
Ceteris paribus, banks, like anybody else, prefer lower rents. But
they’re also rich, and the likes of JP Morgan, Citigroup, Bear Stearns, and
UBS can certainly afford big and grand towers within easy walking distance of
Grand Central. The problem is that those towers don’t lend themselves to the
kind of trading floors which investment banks increasingly need, and they certainly
weren’t constructed with SEC regulations in mind which mandate separate entrances
and elevators for the trading floors. (Well, maybe Bear’s new tower was. But
the rest weren’t.)
The construction boom in Times Square is coming to an end, and I don’t think
there’s any chance that Morgan Stanley, Lehman Brothers, or Bank of America
are going to leave their shiny new buildings in the tourist-infested neighborhood
anytime soon. But for anybody else, the acreage available downtown simply isn’t
available in midtown.
Hedge funds, of course, can happily set up shop on a backstreet somewhere in
Mayfair, or in a small suite of offices in midtown. Banks are another thing
entirely, and I have a feeling that they’re going to end up where the space
is, rather than where the money is.