New York, the financial capital of the world, is facing a massive loss of business as many Wall Street firms have relocated their headquarters to lower-cost and lower-tax states in the South. According to a new report by Bloomberg, nearly 160 Wall Street firms have moved out of New York since the end of 2019, taking nearly $1 trillion in assets under management with them.
Why are Wall Street firms leaving New York?
The main reasons behind the exodus of Wall Street firms from New York are the high taxes, high cost of living, and high crime rates that plague the city. Many firms are also looking for a more favorable business climate and a better quality of life for their employees.
One of the most prominent firms to leave New York was Icahn Capital Management, headed by billionaire investor Carl Icahn. In August 2020, the firm moved its headquarters from the General Motors Building on Fifth Avenue to a 14-story office complex in a Miami suburb. Icahn’s firm manages $22.2 billion in assets and is now located less than a mile away from his mansion in Indian Creek Village.
Another notable firm that left New York was Elliott Management, led by hedge fund tycoon Paul Singer. The firm, which oversees $59.2 billion in assets and is known for its activist campaigns against companies like AT&T, Twitter, and Argentina, moved its headquarters from Midtown Manhattan to West Palm Beach, Florida, in October 2020.
Which states are benefiting from the Wall Street migration?
The biggest beneficiary of the Wall Street migration is Florida, which has attracted 56 of the 158 firms that left New York, according to Bloomberg. Florida offers a warm weather, a low cost of living, and no state income tax for individuals or corporations. The state has also been more lenient in its COVID-19 restrictions than New York, allowing businesses to operate with fewer disruptions.
Other states that have gained from the Wall Street exodus are Texas, North Carolina, Tennessee, and Georgia. These states also offer lower taxes, lower costs, and more business-friendly policies than New York. Texas, for example, has lured firms like Charles Schwab, which moved its headquarters from San Francisco to suburban Dallas in 2020.
What are the implications of the Wall Street exodus for New York?
The departure of Wall Street firms from New York has serious economic and fiscal consequences for the city and the state. According to a report by New York State Comptroller Thomas DiNapoli, Wall Street accounted for 16% of all the economic activity in the city and 7.3% of economic activity statewide in 2020. These figures are the highest in the nation by far, surpassing the national average of just 1.7%.
The loss of Wall Street firms also means the loss of thousands of high-paying jobs and millions of dollars in tax revenue for New York. The city relies heavily on income taxes from wealthy individuals and businesses to fund its public services and infrastructure. The state also depends on taxes from Wall Street to balance its budget and support its social programs.
The Wall Street exodus also poses a challenge for the commercial real estate market in New York, which has been struggling with the impact of the pandemic and the shift to remote work. Many office buildings in Manhattan have seen their vacancy rates soar and their rents plummet as tenants have downsized or moved out. The recovery of the office market will depend on how many firms will return to their pre-pandemic occupancy levels or opt for more flexible arrangements.
