- The ultimate Wall Street company, Goldman Sachs, is reportedly considering moving one of its businesses to South Florida.
- Several other companies, like the $ 41 billion hedge fund Elliott Management, are also planning a move, sparking speculation of an exodus of financial powerhouses from New York City.
- The Sunshine State has long been committed to attracting both executives and their businesses, with the low tax burden being the main attraction.
- The pandemic and the rise in remote working have prompted companies to reassess their real estate footprint and geographic preferences.
- Business Insider spoke to 13 finance and real estate professionals about Florida's growing appeal.
- You can find more stories on the Business Insider homepage.
A Bronx-born billionaire based in Florida fears his hometown will become a "graveyard".
A Long Island-based congressman tells a major bank "not to forsake us" after reading a report on possible plans to move some operations from Manhattan to Florida.
A commercial real estate agent in South Florida offers hedge funds tours of local office space two to three times a day, with “torrential” interest from out-of-staters.
A Palm Beach County job posted on LinkedIn by the recruiting firm Career Group advertises "Personal Assistant Needed" to a "UHNW Hedge Fund Chairman" who recently moved from New York City.
Corporations – and fabulously wealthy money managers – leaving New York City for a warmer climate and lower tax burden are hardly a new phenomenon. And it's not the first time that industry heavyweights have questioned the future of New York as the home of great finance.
But the pandemic and the rise in remote working are accelerating movement from the northeast to the southeast, and this suggests a tipping point has been reached.
"I suspect" Florida will soon be rivaling New York as a financial center, Leon Cooperman, the hedge fund manager who founded New York-based Omega Advisors, told Business Insider in an email. "'Taxes and Expenses' was a policy (in the Northeast). It has to change or New York, New Jersey and Connecticut will become ghost towns."
The billionaire moved to Boca Raton – the posh town south of Palm Beach – 10 years ago, despite telling an institutional investor in 2018 that his wife would not let him sell her home in Short Hills, New Jersey. He told Business Insider his move had nothing to do with taxes and more to do with the weather.
Cooperman was the former CEO of Goldman Sachs Asset Management early in his career before setting up his stock picking hedge fund. The fund returned outside of capital in 2018 and has turned into Cooperman's family office.
The tax policy of the northeastern states, said the hedge fund manager and billionaire Leon Cooperman, "must change or New York, New Jersey and Connecticut become ghost towns."
Rick Wilking / Reuters
Goldman Sachs is reportedly considering plans to move its wealth management operations to South Florida from New York, where its headquarters overlooks West Street in Manhattan's financial district. Investors, policy makers and industry participants reacted viscerally to the news first covered by Bloomberg.
Goldman's move is ongoing, but the announced plans reflect recent moves by other New York-based companies. The ease that employees can quickly get out of hand during the pandemic has proven that remote operations off-site are profitable.
"The conversations are sure to get more frequent," said Brian Guzman, founder of Guzman Advisory Partners, a law firm aimed at investment management firms. "I don't think there will be a mass exodus overnight, but it is a trend that will continue."
The pandemic has proven that an entire office doesn't always have to be in the same room, Guzman said, and other industries have already told workers that remote working can continue indefinitely. For hedge funds, the most important factor – their investors – can be getting used to a remote relationship as well.
"They made it their business to do the due diligence for Zoom," said Guzman. "You no longer have to be in New York, Stamford or San Francisco to raise money."
See also: Wells Fargo drops a WeWork room for 750 people, while Citi signed a contract with the flex office giant far away from a big city. Here you can see how financial companies are converting their properties.
Business Insider spoke to 13 finance and real estate professionals about the lure of Florida.
They described an increase in leases for larger and longer office space by NGOs and a shortage of luxury real estate as the Big Apple financiers flood the area. However, they added that there are also challenges to the Sunshine State's infrastructure and culture that could ensure the real Wall Street keeps its head start.
In terms of money management, Wall Street firms could add Florida to their portfolio, but New York and the surrounding area remain a core position.
Heavyweights in the industry move to Florida
Carl Icahn's name is plastered all over New York City – a medical school on the Upper East Side, a stadium on Randall & # 39; s Island, and a dormitory in the Bronx are all named after the billionaire.
Still, the lively investor – known for controversial proxy battles with its targets – relocated his eponymous company to Miami earlier this year.
Activist investor Carl Icahn moved his company of the same name to Miami earlier this year.
Heidi Gutman / CNBC / NBCU Photo Bank / NBCUniversal via Getty Images
Some hedge funds, like Midtown Manhattan's Elliott Management, have decided to move at least some of their operations to the Sunshine State. Citadel's market-making business built its bubble at the Palm Beach Four Seasons at the start of the pandemic. Charles Schwab, the man behind the broker and asset management giant, moved to Palm Beach this year.
And Blackstone, the world's largest private equity firm, headquartered on Park Avenue in Manhattan, is opening an office in Miami that will create up to 215 technology-oriented jobs. The so-called back office workers of companies who deal with technology systems and are not on the front lines with customers or doing business can often work outside of the headquarters or cities that are considered to be the main money centers.
In an October interview with the Miami Herald, John Stecher, Blackstone's chief technology officer, said the company was looking for a "peer to New York in terms of talent, population, universities and the tech pipeline" that would reflect all that we (got here. "
Goldman Sachs could move front office roles and back office jobs to Florida, according to Bloomberg's report, which named people with knowledge of the plans. Earlier this year, Goldman sent a survey to some employees in its wealth management unit to gauge their interest in moving to South Florida, a source familiar with the matter said.
Continue reading: The Goldman Sachs CFO explained why he feels more confident about plans to move employees to lower-cost hubs
A Goldman spokesman told Business Insider that the bank "has no specific plans to announce" while executing a strategy of finding more jobs in "high quality locations" across the US such as Salt Lake City and Dallas.
The bank is an integral part of New York's status as the world's financial capital, although it has built a significant presence in more affordable cities in recent years.
These efforts are part of a drive to reduce costs. Last month, CFO Stephen Scherr said at a virtual industry conference that the company was making "significant strides" on a three-year plan to cut spending by $ 1.3 billion and will provide a more detailed update in January.
Escaped the helmsman
The Florida migration from finance has turned into a political soccer ball.
Long Island Congressman Tom Suozzi believes high taxes, particularly the 2018 state and local tax deduction (or "SALT") cap, are driving wealthy New Yorkers and corporations away.
Caroline Brehman / CQ Appeal, Inc via Getty Images
Rep. Tom Suozzi, a Democrat representing the suburbs of Long Island and a member of the House Ways and Means Committee, sees individuals and businesses as a direct result of the limitation on state and local tax deductions (known as "SALT") that Republicans introduced did years ago as part of the Trump administration's tax overhaul.
The cap effectively prevents households from deducting more than $ 10,000 from their annual tax bill, which is especially true for high earners in high-tax democracies like New York.
Suozzi has been a vocal opponent of the cap, which he believes is driving the rich and their businesses out of the state, leaving low and middle-income residents with weaker local economies.
See also: 11 million Americans could be hit by a big change in Trump's tax plan, and one CPA says he's getting frantic calls about it
"It's a big blow to New York, especially my district and all of New York State," Suozzi, who represents parts of Queens and Nassau Counties on Long Island, said on a Zoom call with reporters on Monday.
Suozzi said he heard his North Shore constituents, including those who work in financial firms and other industries, say they want to move to Florida because of high taxes.
The rise of the satellite offices in South Florida
The influx of businesses to South Florida – and the deeply pocketed executives, everyday workers and their families migrating with them – are adding to the already robust demand for commercial and residential real estate in the region.
Stephen Rutchik, executive managing director of office services at Colliers in the South Florida area, traced the migration south until the early 2000s, when Art Basel and other cultural attractions made Miami a city that could compete with high-profile hits like New York.
International cultural events like Art Basel have contributed to increasing Miami's awareness among the well-heeled.
Jeffrey Greenberg / Universal Images Group via Getty Images
Prior to the pandemic, Rutchik said some financial services companies moved to South Florida, attracted by low taxes, warmer weather and the low-key atmosphere. But the influx has definitely increased: in August 2019, Palm Beach County's Business Development Board (BDB) reported that 70 New York City hedge funds, private equity firms, and wealth management firms had opened offices in Palm Beach County over the past three years .
"It started about eight years ago when CEOs bought homes along the ocean when taxes rose specifically in New York and Greenwich," said Kelly Smallridge, who heads the BDB as president and CEO and has spent the last 32 years pitching Florida Virtues for winter weary business owners from out of state.
Many companies opened satellite offices because they were spurred on by an executive buying a home in the area, Rutchik said.
See more: In Miami's exclusive, highly secure "Billionaire Bunker", where Ivanka Trump and Jared Kushner have just thrown 30 million dollars on an empty property
When the coronavirus pandemic first hit, renting physical office space wasn't a priority.
"March, April, May and June were very quiet," said Smallridge.
However, during those months, many financiers from the northeast had fled their homes in South Florida, relying on technology to allow them to work outside of the company until July.
Since then, according to Rutchik, the call volume from potential tenants has risen "overnight" to "rapid". He said that his team is now seeing unprecedented interest in providing office space to investment firm representatives at a breakneck pace.
"We tour hedge funds on our agency site one to three times a day," added Rutchik.
Sign rental contracts, buy houses
Potential tenants want more space, Rutchik said, pointing to a deeper, longer-term commitment to the region. The broker had grown used to tracking down small outposts near executive second homes or suitable landing sites for financial services companies moving their Latin American operations to Miami.
But now he sees that companies have enough space for full removals from the northeast. You're trying to lease anywhere between 5,000 and 100,000 square feet.
See also: Meet 4 millennials leaving New York for Florida to escape winter and work remotely while enjoying boating, tennis, and the beach
Businesses don't just search – they sign leases and prepare to physically move employees in before year end to save dollars on their tax bills. Last year Florida cut its corporation tax rate on the 2019, 2020, and 2021 returns from 5.5% to 4.458%. In New York this rate is 6.5%. In Connecticut, where many hedge funds are based, it's 7.5%. Despite Florida's lower tax rate, a 2019 study by the Orlando Sentinel found that approximately 99% of all companies in the state pay no corporation tax at all.
Much of the leasing activity takes place in the sub-lease and prefabricated market, which allows executives, their employees and their accountants to work right out of the box without waiting for the space to be fitted out and completed. In fact, they are ready to move and complete moves faster than previously thought possible.
Rutchik believes this new wave of demand is a direct result of the pandemic. New York's cool temperatures are dampening the appeal of outdoor dining, and as Mayor Bill de Blasio has warned, more lockdown-style restrictions are likely to follow, including a ban on indoor eating from December 14th.
Indian Creek Village, an exclusive private island in Miami, is home to celebrities and billionaires, including Carl Icahn. This week, Jared Kushner and Ivanka Trump reportedly spent $ 30 million on big bucks.
Jeffrey Greenberg / Universal Images Group via Getty Images
Interest in taking root in residential and commercial areas persists even when widespread vaccinations are on the horizon, offering a glimmer of hope for normality in New York.
Palm Beach top realtor Dana Koch said she saw an influx of people working in private equity and hedge fund management looking for permanent residence in South Florida.
"You can enjoy your life 365 days a year," said Koch, who was ranked the # 1 selling agent in Palm Beach by Real Trends and 32nd in the US with 2020 sales of $ 149 million.
Many of these potential buyers had the idea of moving to South Florida for a few years, Koch told Business Insider, but the pandemic hastened their deadlines. House hunter Koch meets in such a way that Florida and New York share the same time zone, which makes it easy to coordinate remote work or even school schedules.
Continue reading: The tech elite is leaving Silicon Valley in droves for "monoculture" and high taxes – this is where it goes
And with big-name firms signaling their intention to move to Florida, Rutchik believes another wave will follow. As the region develops into an accepted – and expected – home base for finance, a "herd mentality" will emerge.
Fishing rods for class A offices.
Of course, there are limits to leasing growth. For one thing, there is only about 67.4 million square feet of Class A office space in the area, compared to 337.6 million square feet in Manhattan alone, according to Colliers research. And that Manhattan number doesn't include the neighboring financial centers in affluent NYC suburbs like Fairfield County, Connecticut, which includes cities like Stamford, Greenwich, and Westport that are popular with businesses and funds.
However, according to Smallridge, the development of new offices in South Florida has seen a boom over the past decade.
"Eight years ago we had a problem where there weren't many Class A office buildings with water views to meet the requirement," said Smallridge.
See also: That's why giants like Facebook and Amazon keep devouring office space and telling workers that they can stay at home
A standout result of the construction is 360 Rosemary in West Palm Beach, a 20-story, 300,000-square-foot office tower being developed by Related Cos, also located behind the Hudson Yards complex in New York City. The private equity company Comvest Partners (also in Chicago), the investment company Norwest Equity Partners (also in Minneapolis) and a coworking space of the Spaces brand by IWG (headquartered in Switzerland) are already intended as tenants for the planned project a grand opening in 2021.
"The influx could come even faster than we expect; West Palm must be ready," wrote Gopal Rajegowda, senior vice president at Related, who oversees the project, in the Palm Beach Post in October.
A new office building under construction in West Palm Beach is attracting nongovernmental finance companies to rent.
360 Rosemary promises a futuristic "hands-free" environment with motion sensors and face recognition technology for contactless entry and bathroom fittings that are operated with sensors.
Another example of an office space in NYC is the DiVosta Towers, an 11-story luxury office complex in Palm Beach Gardens that was completed in 2019 and is home to high-profile renters like JPMorgan. South Florida office space seems like a good investment: In September, the Palm Beach Post reported, DiVosta towers were sold for $ 80 million to Gatsby Enterprises, a real estate company based in New York.
Challenges cloud the Sunshine State
Even new developments will – and cannot – allow a real mass exodus from the Big Apple.
And not all Wall Street employees can get their jobs done far from stock exchanges, according to Bradley Tisdahl, CEO of Tenant Risk Assessment, a commercial consulting firm. Non-bank lenders, wealth management and private equity firms, and business units can easily operate remotely, Tisdahl said. However, proximity to stock exchanges is crucial for anyone involved in the capital markets.
"When you need jobs to get done very quickly, thousands of miles in between can make a difference," he added.
While Wall Street may be emptier this year, staying close to the stock exchanges is still important for many companies – or at least some areas of the company.
Tayfun Cokun / Anadolu Agency via Getty Images
Since Miami also has significantly fewer colleges and universities than the New York area, the job market is comparatively more tense. While businesses can move to Miami to save taxes and pay office rents that are between one-half and one-third of their New York payments per square foot, they may struggle to attract talent.
In addition, employees may only be more expensive to move. The residential real estate market in South Florida has overheated due to increased demand and lack of supply. The lack of available homes to buy, especially in the luxury segment, could limit the number of executives looking to move to South Florida.
Chad Carroll, a compass broker and former star of Million Dollar Listing Miami, says high-end inventory is running low, particularly near the beach, in part due to demand from New York financiers.
"Many of these buyers and tenants picked them up," Carroll told Business Insider. "If you talk about the kind of money these people make, they could be paying for their residences in a few years, or even a year, in tax savings."
Continue reading: Why the Silicon Valley elite are moving to Miami
Even the leading corporations have not made a full commitment to abandoning their Northeast ties.
David Tepper, the billionaire founder of Appaloosa Partners and owner of the Carolina Panthers, moved from Florida to New Jersey this year and listed his Miami apartment for $ 15 million.
According to a person familiar with Elliott, the company is opening an office in Greenwich in connection with relocating its headquarters to Florida – and expects multiple partners to be based outside of Connecticut.
Ken Griffin's Citadel plans to open an office in Miami soon, but both the hedge fund and investment firm are still based in Chicago.
Even though hedge fund manager Paul Tudor Jones bought a $ 71 million Florida home in 2015, he still has his mansion in Greenwich, Connecticut.
Kevin Mazur / Getty Images / Robin Hood
And while hedge fund giant and billionaire Paul Tudor Jones moved to the state, his entire company is still in Connecticut, where he also maintains a lavish mansion in Greenwich.
While companies may be willing to relocate their employees permanently, "New York City is the center of the search," said Brian Davis, a lifelong New Yorker searching for legal talent for financial services firms at the recruiting firm Major, Lindsey & Africa. He dismissed the evidence that Florida could ever challenge New York as unscientific.
Davis added, "The anecdotes are just anecdotes."