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FIRE Tenants Are Not Spreading as Much in Manhattan

Financial firms, insurance companies and real estate operations had long propelled the nation's premier office market


The financial industry, the backbone of New York City’s economy for more than a generation, is showing signs of scaling back its appetite for New York offices.

The square footage of Manhattan renewals and extensions by the FIRE sector — shorthand for finance, insurance and real estate companies — declined almost 27 percent from the pre-pandemic years 2017, 2018 and 2019 to the pandemic-
shadowed years 2020 to 2023, according to data provided by CompStak, a real estate data firm that relies on crowdsourcing. This comes as brokerage CBRE (CBRE) reported a 20 percent availability rate for Manhattan offices in its report for May, close to its record high of 20.2 percent set in February.

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FIRE companies combined leased 3.8 million square feet in the three years preceding COVID-19, compared to 2.8 million in the three years following, CompStak said.

Finance makes up a sizable majority of FIRE. Since 2000, the financial industry made up 72.4 percent of FIRE, and over the past 10 years, that percentage was 67.4 percent, according to data from CBRE. The rest of FIRE’s office share over those 10 years, per CBRE, is composed of coworking or shared space providers at 14.9 percent; real estate (residential brokerages like Douglas Elliman and Corcoran as well as commercial brokerages like CBRE and Cushman & Wakefield, plus the offices of the ownership companies themselves) at 9.5 percent; and insurance at 8.3 percent.

Figures from CompStak also show that the appetite for expansions, pre-leases of space under construction, and new deals dipped almost 20 percent in those same 10 years, going from 7.4 million square feet to 5.8 million square feet.

The declines may be illustrative of a financial industry that is changing, rather than one that is shrinking. As the new millennium dawned, giant global investment banks such as Goldman Sachs, J.P. Morgan Chase, Citigroup and Morgan Stanley, never mind the now-defunct Bear Stearns and Lehman Brothers, could not get enough Manhattan offices, sometimes renting space just to hold onto it in case they needed to expand. 

That rarely happens now, but companies built around private equity, such as Blackstone (BX), KKR (KKR) and Citadel, have been expanding. And they all, to some extent, have been impacted by workers seeking to work from home or from another remote location, thus limiting their need for new offices.

“My sense is that the financial services industry remains the backbone of New York’s economy and office market, and will continue to do so,” said Alie Bauman, a CompStak economist. “While FIRE’s totals are down, just as leasing is overall for office space, FIRE is accounting for a higher share of activity than it did historically, and it seems to me that would be a brighter spot if you’re an office landlord.”

It also helps offset trends in tech and media leasing, Bauman said. 

“While it may be a good thing for the job market and overall, that we have more tech and media jobs, those companies are not taking as much office space, are contracting or subleasing their office space, as they have largely embraced hybrid and remote work to a greater degree than financial companies have.”

Bauman noted that new leasing by financial companies jumped in 2022 but fell again last year. And, in May, banks Citigroup, HSBC and Barclays started to tell some workers to come in five days a week. This, according to Bloomberg, which broke the news, was in response to the Financial Industry Regulatory Authority’s expected move to reimpose pre-pandemic rules involving workplace monitoring. The story said other banks, specifically Deutsche Bank, are reconsidering their work-from-home policies too.

A spokesperson for New York City’s Economic Development Corporation (EDC) noted that the city had nearly 500,000 FIRE sector jobs, 8 percent more than at the low point of the pandemic in July 2020. Citing a survey last year from business group the Partnership for New York City, the EDC also said roughly 80 percent of workers for the real estate industry were in their offices four days a week, and, for the finance industry specifically, roughly 60 percent were in three days a week.

Whatever the share, in-office attendance is not what it used to be, and it’s not every workday. 

“Finance remains the signature industry of the New York region, but both the increase in people working from home and new technologies are dampening demand for office space,” Christopher Jones, a Regional Plan Association research fellow, said in an email.

The dampening demand isn’t stopping new construction. But that new construction might at the same time lead financial institutions to pull back on their footprint further as they consolidate space.  

J.P. Morgan Chase, the nation’s largest bank by assets, is in the midst of building a huge headquarters building at 270 Park Avenue, the site of its older, smaller headquarters building, which it razed to build anew. According to the bank, a 122,500-square-foot lease at 450 West 33rd Street that would have expired in October was extended to 2031. A 231,000-square-foot lease at 237 Park Avenue expires in December of next year. The bank declined to comment on the future of that workspace.

Chase also occupies the entire 383 Madison Avenue, a tower it inherited when it bought Bear Stearns in the run-up to the Global Financial Crisis in 2008. A J.P. Morgan spokesperson said the bank had more than 20,000 employees in the New York area. 

“We are reviewing our long-term real estate plans in the metropolitan area and we have a number of good options, including keeping our premises at 383 Madison and other locations,” the spokesperson said in an email. 

As for 270 Park, the bank expects it to open in 2025, and to house up to 10,000 employees, the spokesperson said. All of this, despite permanent macro changes in office life. 

“From the patterns we’ve seen, work from home is here to stay,” said Stijn Van Nieuwerburgh, a a professor of real estate and finance at Columbia Business School, whose June 2022 research paper written with researchers at New York University and UNC-Chapel Hill warned of an “office real estate apocalypse” and an “urban doom loop” and who has warned of almost $1 billion of commercial real estate debt maturing this year.

A leasing slowdown in New York by traditional global investment banks coincides with a similar slowdown happening in technology, which has grown by leaps and bounds in the city since the financial crisis 15 years ago. 

“These two used to grow in parallel, though maybe not proportionately,” Van Nieuwerburgh said. “I do think we have too much office [space]. Some may disagree, and say we have 20 percent too much or 40 percent too much, but it’s probably something in that range.”

David Levinson has seen both sides. As a partner in L&L Holding (the other L is Robert Lapidus), he stripped two buildings in Midtown down to their studs to remake them into modern office towers designed to be top-end spaces in demand by the finance industry. One was 390 Madison Avenue, where J.P. Morgan has a large flagship branch and a client center. That lease expires in 2029, according to a bank spokesperson. The other was 425 Park Avenue, a Norman Foster-designed makeover that’s primarily rented to hedge fund Citadel.

In April, Citadel announced plans for a new 62-story 1.8 million-square-foot tower at 350 Park with partners Vornado Realty Trust and Rudin Management, both major commercial real estate owners, to be completed in 2032. The plan is for Citadel to occupy some 850,000 square feet. Foster’s Foster + Partners’ London-based architectural firm is to design it.

A list of questions emailed to Citadel went unanswered, but a spokesperson noted that Ken Griffin, the company’s CEO and majority owner, has been “a very vocal and strong supporter” of full return to office, and Citadel has required employees to spend five days in the office since 2021.

From Levinson’s perspective, no matter what the numbers say, there’s momentum behind people wanting to get out of the house and come back to the office.

“We love having [Citadel] in our building, but they outgrew it,” he said. “The pedigree of that building, the quality of it, when it becomes time because things change, if they move out, we will get plenty of notice, and I think a lot of people are going to want to see this building.

“What company in the world would not want employees back in the office?” Levinson added. “Zoom, which would want everyone to be working remotely, is now requiring its employees to be back two or three days a week. Even Zoom is bringing its people back. That’s how people really excel. People love the energy of being with other people. You can only stay in your pajamas for so long.”