Enhanced Transit Options Boost Midtown’s Wall Street Culture
Transportation access has long driven financial services’ migration from Wall Street to Midtown and new projects will only enhance the allure.
Cross multiple subway lines and two major rail hubs servicing hundreds of thousands of riders daily with numerous Class A office buildings, and you get Midtown Manhattan’s multigenerational work culture.
The area’s myriad transportation options have been a major catalyst for why Wall Street executives over the years have decided they didn’t need to physically be near the New York Stock Exchange to do business. The idea of mingling with captains of other industries that were camped out on Park Avenue or Madison Avenue with easier commutes that avoided the subway proved to be major selling points for planting flags in Midtown as opposed to Downtown.
“There was a strong need and desire from the traditional financial institutions to get closer to the major corporations who are already in Midtown, to get closer to international companies clearly established in Midtown, as well as the private equity companies,” said Robert Goodman, executive managing director at Colliers (CIGI) International. “I think the other aspect in thinking about these companies is the impact to business collisions, where people just literally bump into someone along the way, which is not going to happen by companies being downtown and not having that collision with their desired clientele. The impromptu cup of coffee, the drink after, the ‘Let’s get a quick bite of lunch,’ was much easier to do when you were already in the Midtown marketplace.”
Commuting to both sides of Midtown is about to get even more convenient for suburbanites and riders from the city’s farther reaches, thanks to two large-scale Metropolitan Transportation Authority (MTA) transit projects at Grand Central Terminal and Penn Station, which are colliding with work-from-home trends accelerated by the COVID-19 pandemic.
The long-awaited East Side access project connecting Long Island Rail Road (LIRR) to Grand Central is set to debut in December 2022, nearly 60 years after it was conceived. A major impetus behind the $11.1 billion infrastructure initiative, which will add eight LIRR tracks at Grand Central, was to alleviate the need for Long Island commuters to transfer onto subways at Penn Station to head toward the many financial services jobs in Midtown East.
Another MTA project planned for 2024 will enable Metro-North riders from Westchester County and Connecticut to access Penn Station. In addition to easing congestion at Grand Central, Penn Station Access will also serve northern commuters who work at companies on the west side of Midtown such as Deutsche Bank (DB), which is in the midst of a six-month move from Wall Street to Columbus Circle, and Morgan Stanley (MS), which relocated its headquarters to Times Square at 1588 Broadway in 1995.
Office occupancy in the New York City metropolitan area was at 31.2 percent of pre-pandemic levels for the week of Oct. 13, a slight 1.6 percent jump from Oct. 6, according to KastlePresence app access data. Ridership on the LIRR reached 54 percent on certain days in October and 50 percent on Metro North, according to MTA data.
Goodman said he does not foresee changing work habits that have developed during the pandemic disrupting the Midtown Wall Street culture, given that larger firms such as Morgan Stanley, JPMorgan Chase (JPM) and Blackstone (BX) have made clear their intentions to maintain a strong office presence.
“I’m located in Midtown and am starting to see more activity, and I believe there is still a strong desire for people to want to get together to be mentors, to be visible to management in order to help accelerate their career track,” Goodman said. “I don’t necessarily see young people in general wanting to be away from the office environment for any material period of time.”
The financial services sector first began favoring Midtown over Wall Street in large numbers during the late 20th century as companies sought larger space and better transit access for employees who resided in the suburbs. Morgan Stanley, JPMorgan Chase and Citigroup (C) all made the move four miles north, followed later by other firms displaced by the terrorist attack of Sept. 11, 2001.
Deutsche Bank’s move from its longtime headquarters at 60 Wall Street to Midtown’s Time Warner Center (now the Deutsche Bank Center) marks the end of an era, as it leaves no more major banks physically headquartered on Wall Street.
Technology propelled the move to Midtown. Downtown’s original hub of financial services activity stemmed from a New York Stock Exchange requirement that brokerage firms keep their offices around the Wall Street area so clerks could deliver physical papers of stock certificates. Computers and telecommunications ultimately replaced paper notifications.
Kevin Draper, a New York City historian who consults with businesses across the Big Apple, also sees strong indications that Midtown office occupancy soon will bounce back in big numbers, especially within the financial services sector.
“Most people are realizing they don’t want to work from home all week no matter how big their apartment is and how big their house is,” Draper said. “I do lectures in front of companies, and I would say 99 percent of people I’ve talked to have been having this feeling where they realize, ‘Oh, wait a minute, I don’t want to be home all the time.’ ”
While office occupancy is still a work in progress, Midtown Manhattan is experiencing momentum on the leasing side led largely by financial services.
Midtown South saw a 128 percent jump in leasing activity from the second quarter to the third quarter, according to CBRE. Financial services made up 18 percent of all deals behind only the tech sector. Three large Midtown office projects under construction at 50 Hudson Yards, 66 Hudson Yards and Two Manhattan West accounting for 7.6 million square feet are 53 percent pre-leased, per CBRE data.
Zach Steinberg, senior vice president of policy for the Real Estate Board of New York, said strong leasing numbers coupled with JPMorgan Chase’s planned new headquarters at 270 Park Avenue and Blackstone’s office expansion at 345 Park Avenue indicate a vibrant future for Midtown’s financial services sector.
“We see in the market pretty strong leasing numbers in the last quarter, and financial services played an important role in that,” Steinberg said. “We’re obviously in a new world, but people are still taking space.”
Goodman said Midtown’s Wall Street foundation should remain firmly in place well beyond the pandemic, but stressed that over time the area’s high costs could make some companies rethink a possible move back to their roots in the Financial District. He noted that more leaders of investment firms and their employees are choosing to live in downtown areas such as Tribeca and SoHo rather than the suburbs, which could also influence reverting back to the physical Wall Street neighborhood at some point.
“It becomes a great opportunity for the business leaders to attract young people who have as much interest in living in Long Island City in Queens as compared to necessarily saying ‘I will only move to the Upper East Side,’ ” said Goodman of the potential for a new Midtown-to-Downtown migration. “Ultimately I could see more financial companies taking key components of their operations, whether it be technology-driven components of the firm, or other financial components of the firm, moving them downtown, and attracting young, talented people, and giving themselves a competitive edge.”
Andrew Coen can be reached at firstname.lastname@example.org