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Implications of State Street vacating NYC offices

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Myles Udland, Brian Sozzi, and Julie Hyman discuss the possible reasoning behind State Street Corp.'s decision to vacate its two New York City offices as the company has notified its employees that it will not be reopening its Rockefeller Center locations.

Video Transcript

MYLES UDLAND: Returning to the office has been a major topic of conversation over the last several months, and we continue to see companies reshaping their plans to either go back into their office space, or in the case of one firm that we'll discuss in just a minute, decide to vacate that space. "The Wall Street Journal" this morning reporting that State Street has told staffers in its New York offices, so up in Midtown right around Rock Center, that they will not be returning to those facilities. That is according to people familiar with the matter.

Now these folks will have an option to perhaps work in State Street's New Jersey outpost, maybe up in Stamford. The firm itself is headquartered up in Boston. So the way that I think about this story, guys, is the idea of needing to have a presence in each major city where you are doing business. Obviously, State Street, as a major asset manager, is going to be doing a lot of business in and around New York City and the New York City area, and indeed, they still have those two offices within the tri-state area that are options for their staff to occupy.

But the need, let's say, to have very expensive square footage in Midtown or downtown, wherever it is in New York City that you might want to be, that seems like it's going away. And I think the way the commercial real estate market is going to be reshaped is ultimately right on the margins of OK, I don't think any of us believe JP Morgan, for example, is not going to have a massive Manhattan headquarters. But the firms that are working with JPMorgan that need to meet with folks at JP Morgan, JP Morgan's clients, all of those ancillary businesses around that structure, Julie, might deem it less important to have a permanent footprint within the city.

And I think that that is sort of going to be a longer term trend to play out. Not just a work from home hybrid, this that the other, but do you really need an outpost at great cost in each city you're located? Do you need the San Francisco office, and the Chicago office, and the Miami office, and the New York office? Isn't Boston fine, and some cheap sprawl? You're out here in Jersey. How many empty office parks are there? Some cheap sprawl out here is good enough to get the job done.

JULIE HYMAN: Well, and it sounds like State Street also would be willing to have some sort of co-working space that it would lease at lower cost in the city, say if some of its employees have meetings on a given day. But to me, there are sort of two parts of this story. There's one, it's not just about having outposts in every city, it's New York in particular and its status as the center of the financial world.

And I think that there was a quote in that "Wall Street Journal" story from one of the city officials that there is some concern over this. That that has been such a tax and revenue driver for New York City, the fact that the financial industry has been housed there for so long and in such numbers, that this is not one of the bigger ones in terms of the office space that is being vacated, but still, it's something to be concerned about and be aware of, especially since there are so many other firms that are looking at hybrid workforces right now.

And that brings me to the other part of it, which is this continuing evolution of companies that are trying to keep people on the payroll and attract new people to the payroll and offering them more options than ever in terms of what their work life is going to look like as a sort of way to attract them. So it's interesting in that sense as well.

And then, of course, the other sort of little irony that the story noted, that is notable, is that State Street is responsible for that Fearless Girl statue that is down on Wall Street right by the bull that has gotten a lot of attention in the past few years. And now the very company that is responsible for that statue is going to be largely vacating, at least officially vacating New York.

BRIAN SOZZI: Yeah, I'm going to try to stay calm on this one. Really trying to watch and monitor my blood pressure. I will add this though, I hope State Street has thought it, truly thought through what this means for its employees in the city. If you're going to cut tons of expenses, taxes, expenses, you know what related to these headquarters, are you reinvesting in your employees?

Are you going to send a State Street, some form of worker, a maintenance worker, into their home, to set up an office? What are you doing for employees? Or are you just going to cut these expenses, tell them they no longer have an office, essentially treat them like a piece of trash, and then some day maybe a year later, they're off working for Goldman Sachs or JPMorgan. I just hope State Street really thought about its employees here.

MYLES UDLAND: Don't we all hope that for everyone, for everyone's sake as employers begin this process of figuring out what to do on the other side of a pandemic? A pandemic, of course, that continues to change over time.