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Consultants Push Wall St. to Leave
Downtown's losses are huge, but some companies shrug off fears, concentrate workers in midtown

Crain's New York Business

By Stephen Gandel

March 04, 2002

When the World Trade Center was bombed in 1993, Tari Schreider, a leading expert on corporate contingency planning, was flooded with phone calls from financial firms. Wall Street executives wanted to know how much of their workforce should be in one location. Mr. Schreider answered, "No more than a third."

Most of those firms ignored his advice nine years ago. Now, Mr. Schreider says, many more are listening.

"Sept. 11 has absolutely hastened the dispersion of Wall Street," says Mr. Schreider, who wrote The Encyclopedia of Disaster Recovery, Security and Risk Management. "Financial firms that in the past have been reluctant to move away from New York are now taking a hard look at what operations must go."

Consultants such as Mr. Schreider represent one of the great threats to New York. They are getting important support within companies from contingency planners, the executives who have been given the task of making sure another terrorist attack or disaster does not shut down their companies.

"The industry is coming to the realization that having all your eggs in one basket is probably not a good thing to do," says Gregory Ferris, the global head of contingency planning for institutional securities at Morgan Stanley. Within two years, he predicts, firms, including his own, will be far more diversified throughout Manhattan, elsewhere in the city and, most important, in the suburbs and other areas.

Technology and changes in the way Wall Street does business have made it unnecessary for firms to be located near each other. Last year, 25% of securities industry jobs were located in New York City, down from 39% at the beginning of the 1980s, according to the Securities Industry Association.

The figures understate how some companies are concentrated. When Merrill Lynch returns to the World Financial Center, it will employ 8,000 people in the city out of its total workforce of more than 60,000. The vast majority of its investment bankers and analysts, though, are located here.

Of course, it's not certain that Wall Street executives will listen to contingency planners this time, either.

J.P. Morgan is staying

After Sept. 11, J.P. Morgan Chase & Co. decided to continue plans to vacate downtown and consolidate the majority of its New York investment banking operations into a few closely located buildings on Park Avenue. The firm's executives contend that the advantages of having its workers together far outweigh the risks.

"Our team needs to be able to interact in real time," says J.P. Morgan Chase Senior Vice President Tom Block.

Lehman Brothers Holdings Inc. is also ignoring the dispersion calls of contingency planners.

After Sept. 11, Lehman Brothers, which had to vacate the World Financial Center, had the choice of dividing its employees among a number of offices downtown and in Jersey City. Instead, in the first week of October, Lehman Brothers bought a building in midtown and leased space in another nearby, moving the majority of its 6,400 Manhattan employees from the World Financial Center to those locations.

OppenheimerFunds, CIBC World Markets and the Nasdaq Stock Market have made similar moves.

Lehman picks midtown

"We decided being located together was more important than being downtown," says Robert Llamas, Lehman's chief human resources officer.

The exodus of financial services jobs from downtown is decades old. The attack on the trade center, however, stepped up the pace.

In all, 39,610 financial services jobs have been relocated from downtown in the last six months, reports Manhattan-based real estate firm TenantWise.com Inc.

"Long term, Sept. 11 is going to be a major blow to downtown," says M. Myers Mermel, chief executive of TenantWise.com.

More than half, 24,376, of those employees have been moved to midtown, according to TenantWise.com. Whether they remain there or move elsewhere, and are joined by others, depends on which outlook prevails-the views of consultants such as Mr. Schreider, or the philosophy at J.P. Morgan Chase and Lehman.

"Before, people talked of a building going down because of a fire," says Steven Bernstein, head of contingency planning for Citigroup. "Now, many people are thinking nuclear."

Some firms are starting to separate their operations. Goldman Sachs is relocating its equities division to a building in Jersey City. Morgan Stanley bought a building in Purchase, N.Y. Neither firm is commenting on how many employees it may move out of the city, but if these firms and others hope to meet the rising standards of contingency planners, it could be thousands.

Goldman Sachs, for instance, has nearly half of its 20,000 employees located in Manhattan.

"Who wants to be the next Cantor Fitzgerald?" says Joel Kotkin, an economist and a senior fellow at Pepperdine University.

Copyright 2002 Crain Communications, Inc

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