From iconic city headquarters to WeWork deals, here's how financial giants are thinking about the future of their real estate (WFC)
Some financial firms are evaluating their post-pandemic office needs. Wells Fargo is not renewing its lease in a 750-person WeWork space in Charlotte, N.C. Citi meanwhile has signed a lease for a roughly 100-person WeWork space that's not in a major city. UBS is pushing ahead with working with WeWork remodelling a large space in New Jersey, now incorporating a social distancing-geared design. Charlie Morris, head of Avison Young's US Flexible Office Solutions practice, said he's seen financial services remain "active" in the flex-office market, and that his firm's consulting with a "very large" player on committing a large percentage of space to flex-office. Visit Business Insider's homepage for more stories.
Big financial firms now have had the experience of operating largely remotely for the first extended period of its kind. Many of these companies' plans for fully returning employees to buildings are up in the air — particularly in the US — as the coronavirus pandemic's path changes by the day. Some are taking this opportunity to reevaluate their office needs. But there's no industry-wide consensus yet on how it will shake out. Of the 400 chief human resource officers, chief information officers, and chief operating officers across US-headquartered banks, insurers, and capital markets firms polled in an Accenture survey published on Tuesday, 51% expected to keep their real-estate footprints, and 42% expected reductions. Here's a look at some of the biggest financial firms' real estate and flex-office plans: Wells Fargo is leaving a 750-person Charlotte WeWork space In Charlotte, N.C., a big financial-services hub, Wells Fargo has chosen not to renew its lease in a prominent WeWork location in the city, according to a person with direct knowledge of the matter. The bank, headquartered in San Francisco with a large presence in Charlotte, had a 24-month lease for the 750-person space at 128 South Tryon Street starting in September 2019, according to this person. A clause in Wells Fargo and WeWork's contract provided the bank the option to exit the lease after one year, this source said. WeWork has touted the seven-floor, 130,000-square feet location inside the First Citizens Bank Plaza building as its largest office in the Southeast US when it opened, the Charlotte Business Journal reported.
A spokesperson for Wells Fargo declined to comment. A spokesperson for WeWork also declined to comment. Wells Fargo, meanwhile, is planning to keep more than 200,000 employees working from home until at least September, according to a second-quarter earnings call transcript on the investment research platform Sentieo. For Wells Fargo, reducing expenses was a key objective for Chief Executive Charlie Scharf even before the pandemic hit. On the earnings call with analysts on July 14, Scharf said he found some $10 billion in expenses Wells Fargo would need to cut. He said he expected the bank to start taking action in the second half of 2020, and that could mean consolidating branches, field offices, and corporate sites. It's likely the bank will have to house fewer employees, regardless. Wells executives are drafting plans that could cut tens of thousands of jobs starting this year, Bloomberg News reported in early July. The bank reported some 263,000 global employees as of March. TIAA has moved out of a temporary Midtown Manhattan WeWork space it rented while its headquarters are being renovated The $1.1 trillion manager TIAA moved into four of WeWork's five floors at 575 Lexington Avenue in Manhattan as temporary space while its nearby headquarters undergoes renovations. TIAA didn't renew its WeWork lease and moved out as originally planned in June. Employees will work remotely until renovations wrap up. In 2018, WeWork leased five floors at the location totaling 117,000 square feet. According to July marketing materials from WeWork viewed by Business Insider, the coworking giant is currently looking to fill one 20,070-square-foot full-floor space on the 16th floor, as well as 12,000-square-foot and 10,000-square-foot partial spaces on the 15th floor at 575 Lexington. TIAA's real-estate subsidiary, Nuveen, was WeWork's second-biggest US landlord last year, based on CoStar Group data, Business Insider reported in August. Nuveen leased more than 600,000 square feet of space to WeWork in the US as of last June, per CoStar, which declined to provide more recent figures. Nuveen does not own 575 Lexington Avenue. That building's trio of private owners put the property up for sale earlier this year, The Real Deal reported in January. Others are adding flex space, and more deals could be in the future Citi and Mastercard are among the companies that have signed new leases with WeWork recently, according to a July 12 report in the Financial Times. The lease agreement Citi signed with WeWork is for a small office intended for some 100 people, and is not in a major metropolitan US area, a person familiar with the matter told Business Insider. A spokesperson for Mastercard said the company could not comment on specific real-estate deals. WeWork Chairman Marcelo Claure told the Financial Times that the office company was on track to be cash-flow positive in 2021, thanks to aggressive cost cutting and strong in-demand from companies seeking flexible-office arrangements because of the pandemic. Charlie Morris, head of Avison Young's US Flexible Office Solutions practice, said that he's seen financial services remain "active" in the flexible-office market, and that for some firms, the pandemic has been an accelerator. He said that his firm has been consulting with "one very large financial-services firm" on committing a large percentage of its office space into flexible-office in the future. The plan pre-dated coronavirus, but he said that the firm is "definitely involved more so post-COVID." Read more: WeWork is leasing a big new office in Jersey City to house the headquarters of a planned spin-off from pharma giant Merck UBS say it's thinking about flexibility UBS Chief Executive Sergio Ermotti told analysts on a Tuesday earnings call that the Swiss bank has already been looking at its global real-estate footprint. "There is an acceleration that more and more you will have a situation in which people don't have necessarily their own desks, but they have a space in which they need to share. And that creates a lot of flexibility in the way we manage our real-estate footprint," he said.
Last month, the firm's chief operating officer, Sabine Keller-Busse, told Bloomberg News that she could envision about one-third of UBS's workforce of some 70,000 people permanently working remotely. Ermotti largely reiterated that outlook on Tuesday. UBS, with North American regional headquarters in Midtown Manhattan, is working physical-distancing design plans into a previously instated renovation program in conjunction with WeWork for 100,000 square feet of UBS's Weehawken, N.J. office, according to a person familiar with the matter. Morgan Stanley looks to keep its presence in big cities For some firms, the prestige and appeal of big cities could be hard to let go. "I think headquarters will always be in these iconic cities, and the symbol of that — it's kind of the Mecca of the finance industry," said Jocelyn Kung, the founder and CEO of organization development consulting group the Kung Group, referring to New York City. "I would think that symbol will never go away." "But the way that work happens and transactions occur more and more through electronic transfer and remote work — that is not just in the finance industry, but all over it's happening," she said.
On a call with analysts last week, Morgan Stanley CEO James Gorman said having 90% of the bank's total workforce working remotely has given management a chance to rethink office strategy — but shot down the notion the New York-headquartered bank would meaningfully cut back in big cities. "We're committed to the major cities in this world where we have our headquarters: here in New York, where I am today with [finance chief Jon Pruzan] although socially distanced; London; Frankfurt, which we've moved and consolidated, is our European headquarters; Tokyo and Hong Kong. That doesn't change. Morgan Stanley will remain a major player in the commercial real-estate market globally," he said. In wealth management, Morgan Stanley's force of some 15,400 financial advisers have been gradually returning to offices in some areas of the US where local mandates allow, a person familiar with the matter said. The wealth business had already been trimming branches — it had 584 through June 30, down from 591 in March. But that was planned pre-pandemic, this person said, and those offices could wind up with even smaller footprints in the future. Read more: Facebook is eyeing offices in cities like Dallas, Atlanta, and Denver to act as 'hubs' to support 50% of its workers staying remote — and it's a move that could upend Silicon Valley and NYC real estate A startup that uses AI to scan Wall Street chats is flagging more people for cursing and complaining — and it could be a sign of bigger compliance issues while people work from home Wall Street is starting to return to the office — but not everyone is heading back. Here's which finance jobs are the most likely to remain virtual.SEE ALSO: LEAKED DOCUMENTS: WeWork is looking to fill 2 million square feet of vacancies in New York City, its biggest market. Here's what's sitting empty. SEE ALSO: Wall Street's disaster playbook never included work-from-home trading. Insiders explain how banks rapidly adjusted during one of the most chaotic markets in history. SEE ALSO: IBM is ditching a big WeWork office in NYC, revealing the risks of the popular flex-space model as the pandemic prompts Blue Chip companies to rethink real estate Join the conversation about this story » NOW WATCH: How waste is dealt with on the world's largest cruise ship
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