Wall Street Is Moving, and It’s Reshaping New York

From the 86th floor of the Empire State Building, historian Ingo Walter can point to Wall Street’s past, present and future—first facing south, then north, now west.

More than three centuries after Dutch settlers built the financial center’s namesake barrier, Wall Street is more of a concept than a place. It’s been years since most big-name financial firms were housed in Manhattan’s Financial District. Deutsche Bank AG announced its departure this month. Starting in the 1970s, some migrated to Midtown. Now, many are on the move again, this time to Hudson Yards.

Companies, including KKR & Co., BlackRock Inc. and Wells Fargo & Co., have plans to relocate. Many of the corporate transplants are moving out of Midtown, specifically the Plaza District, known for its Central Park views and money-is-no-object offices perched high above luxury stores like Tiffany and Prada. Their new home is built atop and around a rail yard and boasts high-rise towers with views of the Empire State Building to the east.

The addresses and views may change, but Wall Street as it was envisioned in the 1790s is still alive and well. Back then, the new nation needed money and that’s where it went to get it. Captains of industry made pilgrimages to Wall Street seeking funds to build a steel mill or canal, railroad or shipping line.

“The closeness helped information flows—it was very efficient,” said Walter, who is the Seymour Milstein chair of finance and corporate governance at New York University’s Stern School of Business. “Even after hours in the bars. Lots of information passed between people.”

The New York Stock Exchange was the anchor of the old Wall Street, and for the most part, the banks, brokers, securities law firms and the rest that all made it work remained focused in and around the bourse until the early 1970s.

They were tethered by paper.

“To the extent that checks and securities were physical, proximity was essential,” said Sandy Warner, who started his career as a trainee at Morgan Guaranty Trust Co. in 1968 and rose to serve as chief executive officer of JPMorgan & Co. from 1995 to 2000.

That all began to change after the introduction of the IBM mainframe in the late 1960s and the adoption of a numbering system known as CUSIP to keep track of securities. With trading no longer dependent on swapping paper stocks and checks, the titans of Wall Street were free to move out of downtown. Among the first to go was Morgan Stanley, which moved first to Sixth Avenue and then to Broadway near Times Square around 1995. It’s still there today.

Wall Street’s next big relocation came after the terrorist attacks on Sept. 11, 2001, as backup facilities outside the city were expanded, and more firms began moving uptown. Lehman Brothers Holdings Inc. had just finished building a new trading floor at 3 World Financial Center, across the street from the Twin Towers, when the collapse of the north tower sent debris crashing into the building. It moved to a Midtown skyscraper, where it remained until its bankruptcy in 2008 triggered the Great Recession.

Morgan Stanley’s Dean Witter unit, which was located on the lower floors of the south tower, mostly relocated to Purchase, New York. And institutional brokerage Cantor Fitzgerald LP, which suffered the greatest loss of life of any World Trade Center tenant, ultimately wound up on the lower floors of 499 Park Ave. in Midtown.

But Midtown, once able to lure powerhouse financial firms with sprawling office space, has been falling out of favor. Over the past five years, a net 10 million square feet of occupancies has either moved or is planning to move from Midtown, which is the U.S.’s costliest business district, according to real estate brokerage Savills Studley Inc. Over the same period, Hudson Yards has attracted 6.7 million net square feet of leases, while lower Manhattan’s net was 1.2 million square feet.

City officials, aware of the rising glut of space in midtown, last year rezoned the area around and north of Grand Central Terminal to allow for larger buildings. The move is making it possible for JPMorgan, which had once considered moving to Hudson Yards, to stay at 270 Park and build a larger building there.

Recruitment and retention are now a growing factor in deciding where to set up, said David Goldstein, a vice chairman at Savills Studley, whose clients range from corporate law firms like Kirkland & Ellis LLP to retailers such as Ralph Lauren Corp. Financial firms are vying for the same young engineers and developers as Facebook Inc. and Amazon.com Inc., he said. The online retail giant late last year also announced a move to Hudson Yards.

The geography of the city is “really up for grabs,” he said. “The bank is looking more and more like a tech firm with every passing day.”