Suddenly, New Jersey’s Not Just a Wall Street Punch Line
Lehman Bros. has turned its back on New York. Literally. The desks in the financial firm’s new offices here are arranged so they don’t look out the windows, which offer an unsettling view across the placid Hudson River to what was once Lehman’s headquarters in the World Trade Center complex.
“We didn’t think people would want to be looking at it all day,” Lehman spokesman William Ahearn said.
In the wake of the attacks Sept. 11, the financial community has been forced to disperse. Several homeless firms--including Lehman, American Express and Merrill Lynch--have moved large chunks of their operations to much-maligned New Jersey.
For decades, the metropolitan pecking order in New York has been frozen in cliche. You worked in Manhattan. You lived in Connecticut if you had money, on Long Island if you didn’t. New Jersey? It was a punch line, home of the fictional Tony Soprano and the unbearable New Jersey Turnpike.
The state always contained many things that went against this simplistic stereotype, but it never quite shed its inferiority complex.
Now, in a trend accelerated by the World Trade Center attacks, financial companies are discovering the virtues of life on the other side of the river. While the firms say such moves are temporary, any prospect that they will become permanent is deeply chilling to New York officials--city and state.
“Am I afraid of companies leaving New York? Obviously,” said Charles Gargano, chairman and chief executive of the Empire State Development Corp.
The stakes are high. An estimated 10,000 jobs already have left since the disaster. If too many companies discover that New Jersey is not such a bad place after all, and is cheaper and feels safer to boot, support firms in Manhattan, from delis to messenger shops, will fail. Then the damage to New York will be permanent.
As Gargano’s colleague, ESDC President Michael Carey, put it: “The economic future of lower Manhattan is on the line.”
Lehman Bros. occupied the 38th to 40th floors of the World Trade Center’s north tower, as well as much of a nearby--now uninhabitable--building. All but one of its 600 World Trade Center employees made it out safely. But the firm needed somewhere for all of its Wall Street staffers to work. A first step: taking over the 650-room Sheraton Manhattan Hotel.
“We locked up the mini-bars, moved out the beds and got to work,” Ahearn said. “The hotel has been a good short-term solution. We need something more stable.”
While some of that stability will come from a new lease in midtown Manhattan, more is coming from New Jersey. The company already has signed a lease with a neighboring building in Jersey City, for a total of 150,000 square feet.
“It doesn’t really matter where we work. You’re a computer terminal and a phone line away from Wall Street,” Ahearn said.
That’s a cheering notion to the New Jersey Economic Development Authority, as well as its Jersey City branch, both of which were heavily promoting themselves long before Sept. 11.
Three years ago, New Jersey made one of its boldest gambits when it sought to lure the New York Stock Exchange itself. The Big Board held discussions with New Jersey officials but decided to stay on Wall Street.
Move your company to this 250,000-population community, Jersey City promises, and it will pay no city income tax, no corporate tax, no payroll tax and no commercial rent tax. The state says companies can get a rebate of as much as 80% of their state income taxes for luring between 25 and 75 new employees here.
New York Mayor Rudolph W. Giuliani, however, has fought back by granting millions of dollars in tax breaks to law firms, brokerages and other businesses to get them to stay put in Manhattan.
If any major company is thinking of permanently relocating as a result of the attacks, it hasn’t said so. Indeed, the firms are saying the opposite. “We are committed to having our headquarters in New York City,” American Express spokeswoman Molly Faust said.
But she added that it’s too early to say when and how that will happen. In the meantime, the 4,000 employees who once worked in lower Manhattan are split among Jersey City--where American Express, like Lehman, already had space--Parsippany and Short Hills, N.J.; and Stamford, Conn. A few employees remain on Wall Street.
Such sudden decentralization can be a short-term hardship for employees. Transportation in the New York metropolitan area is set up to feed commuters into Manhattan and then take them out again. Doing anything else--going from, say, Connecticut to New Jersey--is an arduous trek.
Still, USB Warburg’s example offers proof that a decentralized approach is viable. Four years ago, the financial firm moved its trading floor--and 3,000 employees--from Park Avenue to suburban Stamford, an hour away by train. An additional 4,000 employees are in New Jersey; 3,000 remain in New York.
The three-state approach happened “partly by design, partly by acquisition,” Warburg spokesman David Walker said. “We think it has worked well. In times of crisis, other sites serve as backup facilities.” Warburg is expanding its Stamford operations by more than 30%.
The more companies that follow Warburg’s path, the more it will bode ill for New York’s economy. Wall Street employed about 185,000 people in the city as of last spring, before a weak economy prompted layoffs. That was only about 5% of all the jobs in New York City but 19% of the total wages. According to one estimate, 14% of total employment in the city is tied, directly or indirectly, to the securities industry.
After the World Trade Center was destroyed, those on Wall Street speculated that some of their colleagues would decline to work again in downtown high-rises.
So far, companies actively are avoiding the downtown core, despite the presence of 6 million vacant square feet. Only two of 42 World Trade Center tenants were intending to relocate in lower Manhattan, according to a survey by Tenantwise.com, an online commercial broker.
Unless the exodus is reversed by a massive redevelopment effort, Tenantwise Chief Executive M. Myers Mermel said, lower Manhattan may come to resemble Detroit.
“It will be an unused urban core.” The international financial conglomerates won’t move to the suburbs, Myers said, because “they have no vested interest in supporting New York. London’s a shorter plane flight. Or Hong Kong.”
That’s a worst-case scenario. Meanwhile, New Jersey’s new employees are getting to know their new home. The hottest tips in Jersey City these days aren’t stocks but whispered directions to great Italian restaurants and secret commuter shortcuts.
As one Lehman Bros. broker stepped off the elevator, he turned to his co-worker and said, “You know, New Jersey’s not nearly as bad as I expected. I just wish I could find a decent place to get coffee.”
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Huffstutter reported from New Jersey, Streitfeld from Los Angeles. Times staff writers Walter Hamilton and Thomas S. Mulligan contributed to this report.
