How Trading Floor Availability Creates Financial Districts


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.

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