Is New York City Coming Back?

Is New York City coming back? Is it rising from the dead? Yesterday, New York’s sometime governor announced that covid restrictions will be lifted as soon as next week. People are going back to work. They are going back to restaurants. We are going to have a concert in Central Park. Hip, hip, hooray.

Now we can ignore the pathetic record of Gov. Cuomo, the Lord High Executioner of the coronavirus.

So, the signs are looking more positive than they have in quite some time. Doubtless, New York’s business community, to say nothing of its real estate interests, have good reason to promote a return to normalcy. They do need to protect their investments, and to protect the commercial real estate market.

And yet, most of us know that the outcome of the mayoral election will have a great deal to say about New York’s future.

People are returning to their offices, especially at major banks, but the subway is still a crime-ridden mess, violent demonstrations and protests consumed Washington Square Park the other day and the city is still dangerous. Worse yet, New York’s great private schools are now indoctrinating their students in critical race theory. 

One leading banker, James Gorman, the CEO of Morgan Stanley told his team that they had to return to the office by Labor Day, lest they suffer the consequences. That is, they will not receive New York pay if they work in Colorado. Hmmm. Apparently, there has been some resistance to the call to return to the Big Apple.

The New York Post has the story:

Morgan Stanley’s chief executive said he expects all New York City employees to be back at their desks by Labor Day — or they will face salary cuts.

“I’ll be very disappointed if people haven’t found their way into the office and then we’ll have a different kind of conversation,” James Gorman said in a virtual conference Monday from the bank’s office at 1585 Broadway.

You will recall that during the lockdowns, serious consultants were saying that telecommuting is the future of work and that there is no reason why staff has to return to the massive office towers in midtown. Gorman, who has more influence over this and perhaps even better knowledge, demurs:

“Make no mistake about it. We do our work inside Morgan Stanley offices, and that’s where we teach, that’s where our interns learn, that’s how we develop people,” the head honcho added.

“If you can go into a restaurant in New York City, you can come into the office.”

So, for Morgan Stanley, remote work is no longer the new norm. Physical presence is. One gets the impression that remote work fostered laziness.

The investment bank has allowed its 70,000 employees to work from home during the pandemic but is now sending a clear message that remote work is not the new norm.

Anyone who refuses the corporate dictum, will be penalized, salarywise. 

Gorman even threatened the possibility of pay cuts if staff do not comply.

“If you want to get paid New York rates, you work in New York. None of this, ‘I’m in Colorado and work in New York and am getting paid like I’m sitting in New York City,'” Gorman said.

But then there is Goldman Sachs. The company has beaten Morgan Stanley to the punch. It’s workers reported back last Monday. But, the larger question remains: how many employees is the company going to send to its new branch in Palm Beach? 

According to the New York Post, the number is 100:

More than 100 key Goldman Sachs employees are reportedly poised to migrate from the firm’s New York headquarters to a new office in Palm Beach, Florida.

The snub to the Big Apple — which comes as Goldman bankers reported back to the office on Monday after more than a year of working remotely — would mark a shift in Goldman’s more than 150-year-old, New York-centric strategy at the hands of Chief Executive David Solomon.

Apparently, there is no rush to move to Florida. But still, there is considerable interest, by people who hold important executive positions:

The Florida expansion is in the early stages and a few employees have made firm commitments, according to a report from Business Insider (paywall). Among those who have expressed interest in moving are partners in the firm, whose salaries start at $950,000 not including bonuses and other perks.

“High-performing managing directors or vice presidents are also being encouraged to relocate, to signal that the office won’t be considered a backwater that kneecaps their Wall Street career,” the report said, citing an unnamed source.

Keep in mind, these high performing executives are the New York City tax base. Just a handful can certainly impact the city budget.

As opposed to Morgan Stanley, people who work in Florida will still receive New York wages.

Staffers who move to Florida will not be expected to take a pay cut, according to the report.

The Post mentions two divisions that are beginning to migrate workers. One is the global markets division and the other is the trading division:

Goldman executives at the global markets division, which includes the the core sales and trading operations, will select which members of the team to send, with the idea that “each cluster would be an offshoot of a larger team based in New York and made up of as many as eight or 10 people,” the report said.

Marc Nachmann, co-head of the trading division, commutes regularly from Boca Raton, which could be part of the reason behind the migration. The other head of trading, Ashok Varadhan, is based in New York.

So, the firm is moving slowly. It is especially cautious because earlier plans to move its Asset Management division to Florida have not worked out. Not enough employees wanted to move:

As reported by The Post, Goldman’s Asset Management division had been planning to expand its presence in Florida but a lack of interest has stalled those plans. When employees were polled on the cost-saving idea — with managers informally sounding out the rank-and-file, and the company even sending out an email survey — the bank was met with a notable scarcity of snowbirds, sources told The Post.

Goldman has previously dismissed the idea that the firm is planning major relocations.

“As announced at our investor day in January 2020, we are executing on the strategy of locating more jobs in high value locations throughout the US, but we have no specific plans to announce at this time,” Goldman said in a statement.

Needless to say the bank does not want to take the public relations hit that would befall it if it seemed to be abandoning a sinking ship. Nor, for that matter, does Morgan Stanley.

As for New York City’s future, the jury is still out.