Goldman’s Florida Flirtation Stings Shaken NYC Office Market

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With workers at home and offices mostly vacant, Manhattan is quiet. And as companies look to trim costs, they’re trying to shed expensive real estate.

For New York City’s office market, battered by a pandemic that has emptied Manhattan’s skyscrapers, Goldman Sachs Group Inc. weighing plans to house a key division in South Florida couldn’t come at a worse time.

While finance firms have been shifting employees to lower-cost cities in recent years, Goldman’s flirtation with Florida comes as New York struggles to regain its footing nine months after the coronavirus shut the city down.

“This is an important reminder to policy makers that we can’t take jobs for granted, even those that have been here for generations,” said Jeff Blau, chief executive officer of Related Companies, the developer of the Hudson Yards project.

Sublease Surge

In November, the amount of office space available for rent in Manhattan hit the highest level since 2003. That comes as subleases flood the market. Beyond the office vacancies, New York faces a deeper crisis. Restaurants are struggling to survive and Broadway is dark. At a time when many are avoiding large crowds, parts of the city remain eerily quiet.

While potential vaccines are fueling hopes of a return to normalcy in 2021, Goldman is highlighting an uncomfortable question: If remote work is effective, maybe companies don’t need so many people in Manhattan.

“All the banks, insurance companies and hedge funds are considering options,” said Kathy Wylde, president of the Partnership for New York City, a civic organization comprised of corporate chief executives. “Moving operations to a lower-cost environment is particularly tempting.”

Written Off

New York has been written off before, most recently in the aftermath of the Sept. 11 terrorist attacks and the financial crisis. Each time, the city bounced back. As the thinking goes, there’s no place quite like New York and while banks and hedge funds might move some people to Dallas or Miami, they’ll still need a big presence in the financial capital of the U.S.

Goldman, considered an industry trendsetter, has expanded operations in places like Dallas and Salt Lake City in recent years. Moving part of its asset management arm to Florida would be among the highest-profile financial industry departures from New York, coming after AllianceBernstein Holding LP announced plans to move its headquarters to Nashville in 2018.

Brooklyn Borough President Eric Adams, a candidate for New York City mayor, slammed Goldman on Tuesday and characterized the potential move as a show of poor corporate citizenship. In a sign that city officials are keeping tabs on how companies support New York during the pandemic, Adams said Goldman’s deliberations should remind regulators to keep a close watch on the banking industry.

“New York grew Goldman Sachs into the international behemoth that it is today with our wealth of talent, tax breaks, and the exciting energy only New Yorkers can provide,” Adams said. “Goldman should be asking how it can help our city during this unprecedented crisis, not turning its back on us.”

Some banks are staying in New York, but cutting their space. Barclays Plc is exploring shifting its headquarters to Hudson Yards, though the new offices would be roughly half the footprint of its current Times Square skyscraper.

Tech Boom

Not all companies are retreating. Prior to the pandemic, technology firms were gobbling up office space in New York, eager to tap into the region’s talent pool. And while the tech companies are also working remotely, they’ve signaled that they see a future in Manhattan. Apple Inc., Facebook Inc. and TikTok have signed leases in New York this year.

The leases are evidence that companies still want to be in New York. But local leaders can’t ignore the draw of cheaper locations, according to William Rudin, CEO of prominent landlord Rudin Management Co.

“Companies have tremendous amounts of flexibility on where they can locate people,” he said. “Our political leadership needs to be cognizant of this and aware of it and needs to address it.”

©2020 Bloomberg L.P.

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