Deutsche Bank expansion could be game changer for Jacksonville

[JayBird]

For those who read the WSJ, the companion piece to this story was about how since the 2008 recession, banks have been leaving NYC. Now the traditional banks are realizing that a physical presence on its namesake street has no real benefit. There are other companies looking to Florida, and to Jacksonville (my employer included) and I feel in the next five years we will see more and more traders, analysts and top tier market positions based in the southeast. It simply comes down to feasible economics. Why should a company pay more for office space and personnel if they can get same quality elsewhere for less?

All that being said, what is most shocking to me is that how the people who bad mouth the city and complain about its "backwardness" are usually from Jacksonville or have lived here 15+ years. When someone hears a cities own residents talk about how it's such a bad place, that usually translates to gospel and becomes word of mouth hysteria.

I loved this article, and as those who know me in NYC know, I never miss an opportunity to talk about how great Jax is, and push my company to move me back permanently.

I saw someone on this forum before say "Jacksonville's biggest problem is Jacksonville" (apologies for not remembering poster to credit) and oh how true that is.

[edjax]

^+1000.   Before Jax I lived in Cleveland and it was the same way.  And I actually loved Cleveland and natives couldn't understand how that was possible. 

[jcjohnpaint]

I grew up in the Northeast and spent much time between NY, Philly, and Pittsburgh.  I really love Jax.  I am not sure why, but I do.  I think it is hard to compare Jax to a city of 5+ million and wonder why it isn't as cool and productive.  I am not defending the local politicians, because they truly do hold this city back, but Jax has great neighborhoods and neighborhood groups. 

[CityLife]

All that being said, what is most shocking to me is that how the people who bad mouth the city and complain about its "backwardness" are usually from Jacksonville or have lived here 15+ years. When someone hears a cities own residents talk about how it's such a bad place, that usually translates to gospel and becomes word of mouth hysteria.

I saw someone on this forum before say "Jacksonville's biggest problem is Jacksonville" (apologies for not remembering poster to credit) and oh how true that is.

If you think Jaxson's talk bad about Jax, ask people from South Florida or to a lesser extent Orlando and Tampa what they think. I went to school at FSU for 6 years, hung out with UF friends a lot and have hung out with a lot of people from other parts of the state. Also have family from all over the state and a wife from South Florida.

Part of it is a competition thing. Part of it is a cultural thing...and it also goes both ways, as you rarely hear a Jaxson say anything good about Miami or Orlando either.

[thelakelander]

I grew up in Central Florida. Jax was known as the Armpit of Florida.  However, to be honest, back in the 80s that was a very deserved slogan. Nevertheless, I never appreciated the area until visiting after college and driving through neighborhoods I had never seen.  For the first 24 years of my life, all I ever really saw of Jax was the Northside, Arlington, Orange Park and what you can see from traveling on I-95 and I-295.  I could tell you a lot about 80s Springfield, Gateway Mall, Soutel, Durkeeville, Lem Turner, etc. but I never visited the beaches, traveled past UNF, checked out Riverside, San Marco, etc. before taking a job here in 2003.

[simms3]

All that being said, what is most shocking to me is that how the people who bad mouth the city and complain about its "backwardness" are usually from Jacksonville or have lived here 15+ years. When someone hears a cities own residents talk about how it's such a bad place, that usually translates to gospel and becomes word of mouth hysteria.

I saw someone on this forum before say "Jacksonville's biggest problem is Jacksonville" (apologies for not remembering poster to credit) and oh how true that is.

If you think Jaxson's talk bad about Jax, ask people from South Florida or to a lesser extent Orlando and Tampa what they think. I went to school at FSU for 6 years, hung out with UF friends a lot and have hung out with a lot of people from other parts of the state. Also have family from all over the state and a wife from South Florida.

Part of it is a competition thing. Part of it is a cultural thing...and it also goes both ways, as you rarely hear a Jaxson say anything good about Miami or Orlando either.

I recently met someone here in CA from Central FL originally and when I mentioned I was from Jacksonville his reply was, "Wow, you're really..."polished", for someone from Jacksonville".  I get that "insult" a lot and while I sound like I'm a negative guy on here in Jax specific forum, I'm a really big "defender" publicly.  I think most people who leave Jax are not only in a position to leave (which let's be honest, sadly lots of people aren't very mobile) and have an ambitiously strong desire to leave to go live in a big city.  Conversely, it requires an mobility and an ambitiously strong desire to leave a big city for a smaller city/suburbs/small town for that to happen.

I think I hear a lot of people trash talk their own "small towns" if they have moved on to a big city or are still "stuck" and looking for opportunity to leave just like I've heard people trash talk "big cities" as being "over it" and looking for something exactly like Jax (generally younger for the former and older demographic for the latter).  It's a 2-way street.  Actually, some of the most blatant hometown hero boosterism I've heard comes from folks from smaller cities, including Jax, and it can be as strong as an allegiant New Yorker's blatant view that their city is the center of the world (and it is).

And so I must comment on:

For those who read the WSJ, the companion piece to this story was about how since the 2008 recession, banks have been leaving NYC. Now the traditional banks are realizing that a physical presence on its namesake street has no real benefit.

I completely disagree with this notion and can easily provide a clear argument for why this is not true.  I'll hold off and simply say that cities that are already "important" are only becoming more and more important while other cities are trailing and playing "keep up/catch up", maybe stagnating, or even declining (in America).  I'd say the "important" cities are NYC, LA, SF, Chicago, DC, Boston, Seattle, and Houston, with Minneapolis, San Diego, Austin, Atlanta, Dallas, Charlotte, Denver, and Philadelphia basically "trailing" at this point.  Anything else is merely a trickle down effect of what these cities don't take as far as resources.

Any company that depends on clients (financial services, law firms, design firms, media/PR firms, real estate firms, etc) will always locate where the largest concentration of their clients do business.  Their clients are hiring creative types, engineers, MBAs, and scientists among other things, and these people have proven that they prefer to live in big cities upon graduation.  Services firms' clients are chasing their talent, no longer the other way around.  It all leads back to the same few cities.  Not to mention that air travel is becoming more and more important (especially with globalization) and direct connections can make or break a location as a place to do business.  Options at JIA are extremely limited and usually require an air-"bus" with a first class that barely offers improvement over economy.

Just saying.

That said, Jax is clearly very attractive for corporations who are themselves a client rather than needing clients for business.  If they are looking to relocate their HQ or a division, then Jax does have the "swaying palm trees", golf courses, low cost of living, beach, a low cost business environment that gives out handouts, etc etc.  All attractive to the right companies.

[JayBird]

^ I agree with your second part, and I too thought no financial company could exist, at least that dealt with trading, asset mgmt and m&a type work without some sort of NYC presence. Then in talking with co-workers I was found to be wrong. The recession forced these companies to get creative in spending and at the same time NYSE went fully computerized. My employer actually announced three months ago that by 2018 we will only have space in NYC for "customer liaison, B2B meetings and other localized services". In fact the entire trading desks will be moved, right now ATL and MIA are the top two possibilities, but it goes to show there is a transitioning happening across the industry and the fact that a new generation is now moving into upper mgmt positions after battling through the recent cuts.

[simms3]

^^^ICE out of Atlanta just bought NYSE last year.  Could that be an implication for what you're talking about?    I would NOT want to be on a trading desk in Atlanta because there is no "fun" office area in Atlanta to grind away (ICE is taking boring suburban office space as we speak for instance).  There's a boutique trading desk in the suite next to me in my office building - I would NOT want to be on a trading desk here in SF/West Coast either due to the difficult off-hours time one has to live their life as a west coast trader.

My company has two investor classes - institutional/sovereign wealth/HNW investors, and retail investors with a investment floor of only $20-$30K.  And we have two security types (outside of special accounts) - an open-ended perp and closed-end.  We throw our institutional investors in the former and our retail investors in the former.

We cannot be taken seriously when pitching to global pension funds, endowments, sovereign wealth funds, billionaires, etc if we don't have NYC letterhead/address on pitch books/letters.  Plus everyone and their mom is in NYC.  Only firms that exclusively handle tech investments or O&G investments can forgo NYC for SF or Houston respectively, and still be taken seriously.  Even with our retail investors, we have to partner with banks to market the securities, so having a presence in NYC to maintain a relationship with banks up there makes sense, though really you can maintain banking relationships/make pitches to banks in any major city with regional offices and/or a few HQs.

Our guys up in Manhattan get called for spur of the moment meetings somewhere in the city (or conversely they get called to Dubai and must show up within 24 hours).  This allows us to win investors.  We cannot do that from Dallas, Denver, Pittsburgh, Atlanta, or let alone Jacksonville [or insert small city here].

I think similarly, every law firm that wants to be something/taken seriously must have a New York office.  You can look at firms' letter head or books and at the bottom you'll always find the same 5-8 cities, New York being one of them every single time along with Chicago, DC, LA and SF (or Palo Alto).

I still think there's no way this is all changing and the "greener" pasteurs are cost-saving (imo cost-cutting) cities.  Having direct access to global markets and the best talent pools is far more valuable than saving money on office space.

[JayBird]

Take it from someone who is on the frontlines, NYC and the finance industry as a whole is changing. The 'prestige' that comes with a NYC Address is quickly diminishing, partially due to fund traders using a mail service and working out of Stamford or Providence. Like I said, it isn't going to stop being a financial center ... But to say it can't is just ignoring the shift that is already happening. Foreign investors no longer travel to seal the deal, they can do that over video conference with Skype or Oovoo, and my company is leaving a small office (less than 20 employees) for those who still need that 'prestige'.

Also, as someone who is working on my own divisions budget, NYC is expensive not jus in office space but in payroll taxes, salaries, payroll taxes, health insurance premiums and the cost per employee (bc great mass transit costs $$$). Part of my division is moving to Jacksonville next year, salary projections are $68-85/yr and we were told by local staffing firms that was on the high end. Those positions are currently being paid $80-116/yr in the city. Also, stuff as a simple as office supplies are cheaper bc Boise Cascade doesn't have to pay the state and city surcharges in Florida that is prevalent all over northeast corridor. The low numbers show a savings of over $35M over three years simply by moving operations from NYC to Charlotte-ATL-MIA. That's some serious $$$ and just a small portion of the overall company. And more and more are realizing this. It isn't new, funds have been fleeing the NYC since 2002 to go just about anywhere in the US.

IMO, this is the change of gen Xers moving into the top mgmt of traditional companies replacing the leadership that came from the 50's/60's babies and were raised on Reaganomics business models and food before microwaves

I think that footprint will always be in NYC, but it is obvious to those in the industry that the footprint is becoming more like a size 2 toddler shoe vs the size 23 NBA-er shoe it was during the 80's and 90's.  And NYC doesn't mind, the space from banks leaving is actually being snapped up by foreign companies that want an American presence, so the cycle is still progressing.

Also, talent will always follow the money. You can put it out in the Nebraskan plains and they will still get talent if they are paying more than the local average. This is an extremely mobile generation, after all I have a 1200 mile commute every Monday and Thursday.

[simms3]

Can't 100% disagree, per se, and I do realize all of the little intrinsic costs working in a similar high cost city/state myself.  I don't think the change will be nearly as drastic as you say it will.  A good 80-90% of my friends outside of Jacksonville are in finance, with many up in NYC, so we talk and they aren't leaving anytime soon. Shifts happen, but while maybe some Wharton grads will end up down in Atlanta where one can still demand a high salary despite the lower COL, the bulk will still be in NYC, SF (where it has a 2nd campus and many do their 2nd year out here), DC, Boston, and Chicago, and no offense but until these grads have families and are semi-retired they won't end up in 3rd tier cities like Jax (you don't go to Wharton or any other top grad school in any field to make less than 6 figures no matter how low the COL...not to mention the purpose of grad school is to network and set your geography for years to come...and it won't lead you to Jax, maybe to an Atlanta especially if you go to GT or Emory, certainly to SF if you go to Stanford or Berkeley, LA if you go to USC or UCLA, NYC if you go to school up north, etc).

If you want to be in tech finance, then there is no doubt you absolutely have to be in either SF or Palo Alto, which is why Ivy's and other good B-schools have campuses in SF/Bay Area.  The area still stands as the de facto hub of VC, tech hedge funds, tech M&A (thinking the IB GCA Savvian for one, and lo and behold it's HQ'd in Tokyo with offices also in NYC, London, and Shanghai), and tech private equity.  I think the same thing stands for O&G/energy, except you need to be in Houston.  There's even an IB with my namesake that focuses on energy companies that is HQ'd on prominent Louisiana St in DT Houston, and lo and behold it has a London office (instead of an NYC office).

Where people make their money is in their relocation to a less expensive city.  For instance, I already make enough to buy a really nice car and a high-floor 2 BR in the Peninsula, decking it out with good furniture.  Here I don't make enough to own a car or live in more than 450 SF.  I could be like others in NYC and SF, put my time in, build up a huge base/bonus, and then if there is the option move to a low-cost city like Jax as a principal or senior mgmt, basically keeping my pay but now having a runway to spend it.  People don't necessarily lose their NYC or SF salaries if they move to a less expensive city, at least that's the way it was in Atlanta and I know that to be largely true throughout a lot of FL, but we're talking senior people.  Not analysts, associates, or young VPs, and we're talking about people working in environments for companies with the flexibility, which is not always an option and sometimes you have to fully retire or start over when you "downgrade" to smaller city.

For me, my job description doesn't even exist in Jax.  I wouldn't want to work in Jax anyway - I enjoy the young vibe of my financial center where I can leave work at 11pm or later and still go meet folks for happy hour down the street at many different options.  That's intrinsic appeal which will always attract the talent and can't be replicated in spread out low cost work environments where people aren't even expected to work more than 9-10 hours in a day anyway.  From experience, I can tell you that Atlanta has a degree of that E Coast work demand, and unless you're in Midtown or Buckhead, you're grinding away in a suburban office building with no mingling or happy hour to look forward to afterward (especially since you need to drive).  It's not pleasant (and Midtown/Buckhead still can't compare to Manhattan, Boston, or SF).

[urbaknight]

Deutsche is investing heavily in their campus and bringing a lot of jobs. Their Southside location is part of their strategy here, and bringing this much investment in has been a major positive for the city.

The location and expansion of companies like Deutsche will help fuel additional infill development around Tinseltown and SJTC.

Who cares about Tinseltown and the SJTC! Those are the two areas that suck the life out of Downtown the most. The more "infill" ( I don't consider suburban projects infill) we see there, the less actual infill we will see Downtown.

If I had billions of dollars, I'd buy all of Tinseltown and the SJTC, tear them down and return the land back to its natural state. I truly DESPISE  that part of town!

[mtraininjax]

Getting back to the original thread...DB expansion of jobs to Jax......

I did see where PHH was shutting 300+ jobs from their southside location, so the DB news may help some of those folks find employment. It all helps.

[danno]

Getting back to the original thread...DB expansion of jobs to Jax......

I did see where PHH was shutting 300+ jobs from their southside location, so the DB news may help some of those folks find employment. It all helps.

And our layoffs at British Airways start on 25OCT...  Everybody will be gone on 20DEC.  It will be 250 jobs in total.

[simms3]

From:
http://online.wsj.com/article/SB10001424052702304441404579123690642256618.html#printMode

When the financial sector began healing after its 2008 crash, New York landlords were hopeful that big banks would return to their traditional roles as the growth engine for the nation's largest office market. They are still waiting. Even with the economy improving, banks aren't absorbing the New York office space they jettisoned after the downturn. Rather, millions of square feet of new space that used to be occupied by banks such as J.P. Morgan Chase & Co., Bank of America Corp. and UBS AG, is on the market. Banks have been under pressure from the weak U.S. economy, new regulations and soft loan demand. As a result, they are cutting costs and nonessential businesses and moving employees out of Manhattan to regions where rents and salaries are lower.

The 10 largest banks in the city reduced their space by six million square feet to just under 32 million square feet between 2008 and early 2012, according to a report last year by International Strategy & Investment Group Inc. Since that report was issued, banks have shrunk or are planning to contract their footprint by another two million square feet, real-estate experts say.  Office rents in top towers have grown at stubbornly slow rates as a result, prompting some landlords to focus on attracting tenants in the tech and media sectors, or on converting office space to apartments.

The large financial firms are "not as relevant to today's market, for now," says Dennis Friedrich, chief executive of Brookfield Office Properties Inc.,one of the city's largest landlords. "We've changed our strategy." Brookfield earlier this year changed the name of its huge downtown office complex to Brookfield Place from World Financial Center, an acknowledgment that demand wasn't strong from the financial sector and the old name might deter companies in other industries. Earlier this month, a 1980s-era Bank of America lease in the complex expired, reducing its space to 800,000 square feet from 2.3 million square feet.

In another symbolic deal, J.P. Morgan last week received first-round bids for its marquee Lower Manhattan tower Chase Manhattan Plaza, with multiple offers significantly exceeding $600 million, according to real-estate executives familiar with the offering. J.P. Morgan intends to vacate most of the 60-story modernist skyscraper. "This is a way to look at things and say, 'How can we use what we've got and be smart with the space we have?'" says Melissa Shuffield, a J.P. Morgan spokeswoman. Bidders include RXR Realty and L&L Holding Co., both local office landlords, the executives said. Some bidders are considering converting some of the property into apartments or a hotel.

The contraction by Wall Street has been a headache for landlords who have been stuck with vacant space. Manhattan's office vacancy rate stood at 10.6% in the third quarter, down slightly from a postcrisis peak of 11.6% in 2010, according to Cushman & Wakefield Inc. The financial sector accounted for 15.3% of new leases in the first nine months of 2013, compared with 30% in 2007, the firm says.

Fortunately for owners, very few new office buildings have come to the market in recent years. But a lot of new supply is in the pipeline and those developers have had to look to other sectors for customers. For example, the largest tenants to commit to the World Trade Center have been publisher Condé Nast and GroupM, a subsidiary of advertising giant WPP PLC.

In past downturns, New York's financial-services sector has proved more resilient. For example, the number of Wall Street jobs in New York declined from 200,300 in 2000 to 159,000 in 2003, but grew consistently to 191,800 in 2008, according to the New York State Department of Labor. In the latest downturn, jobs fell to a post-crash low of 165,200 in August 2009. Since then they have crept back to 167,800 as of August. The sector's weakness this time partly reflects the severity of the downturn, the worst since the Great Depression, experts say. Also, new regulatory controls that restrict banks from some risky practices of the past have kept headcounts stagnant or even falling.

In addition, banks are using technology and other new approaches to work spaces to use space more efficiently. Credit Suisse, for example, has adopted a program called "Smart Working" which uses methods such as desk-sharing and cloud technology to cut back on space needs. The bank also is planning a significant reduction of the 3 million square feet of office space it currently leases near Madison Square Park, according to people familiar with Credit Suisse's plans.
Wall Street's lack of appetite for space has weighed on Manhattan rents. Prices for top-quality buildings increased just 2% over the past 12 months to $68.40 per square foot annually, according to Cushman & Wakefield.

These rents are still high enough, though, to convince banks to look elsewhere. Deutsche Bank AG is growing in Jacksonville, Fla. while some of the space it used to occupy at 60 Wall St. is being marketed. Citigroup Inc., which is consolidating and shrinking in Manhattan, last year said it plans to shuffle off some New York employees to Buffalo.

New York's financial sector isn't expected to stay in the doldrums forever. Landlords say smaller and midsize financial firms have been expanding. "There are a significant number of newly formed money-management hedge fund, venture capital, private equity" and other money managers, Douglas Linde, president of office giant Boston Properties, said at a conference last week. "That's where we are seeing the activity." Even so, Mr. Linde said the "customer" had changed. "We are all banking on technology, life sciences and biotechnology to...be the engines of growth."

Going back to the convo between Jaybird and myself.  I think we were saying all the same things as in this article, but without breaking out "Wall Street" from the financial sector in general.  My firm is a mid-size private equity shop, which is clearly one of the growth industries of the financial sector and our NYC office is expanding rapidly and we *have to* have a presence there as we fundraise and partner with banks/IBanks to securitize instruments and market our own securities, etc.  But Wall St as in the top 10 banks and their more bread and butter divisions (Securities/IB, Fixed Income, FX, Derivatives, etc) itself is clearly shrinking in general and in NYC in particular.

[JayBird]

^ agreed, good find