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
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
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
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
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
"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
Goldman Sachs, for instance, has nearly half of its 20,000 employees located
"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