Wall Street Firms Flee New York, Taking Trillions in Assets with Them
In a major blow to New York City’s economy, nearly 160 Wall Street firms have relocated their headquarters out of the Big Apple since the end of 2019, taking almost $1 trillion in assets under management with them. The exodus is driven by concerns over rampant crime, high taxes, and the soaring cost of living in the city.
According to data compiled by Bloomberg from 17,000 companies, 158 financial firms representing a staggering $993 billion in assets have left New York. These firms have also taken thousands of high-paid employees with them. The move has been particularly prominent among hedge funds and investment management firms.
One of the most notable departures is Icahn Capital Management, led by billionaire corporate raider Carl Icahn. The firm relocated from Manhattan to a Miami suburb in August 2020, just a mile away from Icahn’s mansion in Indian Creek Village. Another prominent firm, Elliott Management, moved its headquarters from Midtown Manhattan to West Palm Beach, Florida, in October 2020.
Florida has been a popular destination for these Wall Street firms, with 56 of the 158 companies choosing to relocate there. Other warmer states such as Texas and the Carolinas have also attracted many firms. California has also lost $1 trillion in financial assets under management to these lower-cost states.
The mass migration poses a significant economic threat to New York City. Wall Street accounted for 16% of the city’s economic activity last year and 7.3% of economic activity statewide, the highest in the nation. The exodus also has severe tax implications, as financial firms paid $5.4 billion in New York taxes last year, accounting for nearly a quarter of all personal income tax collections.
The relocation trend is expected to continue, with Wall Street bonuses potentially slumping by as much as 45%. This decline in tax revenue from the industry will have a significant impact on the city and state. New York’s share of financial-industry jobs has already dropped to 17.6% in 2022, down from a third in 1990.
The cost of living is a major factor driving these relocations. Companies like Goldman Sachs have been heavily investing in Dallas, where the cost of living is about 40% cheaper than in New York. Goldman Sachs is constructing a three-building campus in downtown Dallas, thanks to $18 million in tax breaks granted by the city.
Other prominent firms, including Icahn Enterprises and AllianceBernstein, have also moved their headquarters from New York to lower-cost states. AllianceBernstein relocated to Nashville in May 2022, taking $685 billion in managed assets with it and saving $80 million annually. Charles Schwab officially designated its headquarters in Westlake, Texas, outside of Dallas, after acquiring TD Ameritrade.
The exodus of Wall Street firms poses a significant challenge for New York City’s economy and tax revenue. The city and state will need to address the concerns driving these relocations to retain their status
What are the main reasons behind Wall Street firms choosing to relocate from New York City?
Ies choosing to relocate there. Other states that have attracted firms include Texas, Connecticut, and New Jersey.
The reasons behind the moves are varied but often center around concerns about the business environment in New York City. The increasing crime rate has been a significant concern for many firms, particularly in the wake of the George Floyd protests and the subsequent rise in civil unrest. High taxes have also been a major factor, with New York City imposing some of the highest individual and corporate tax rates in the country. Coupled with the soaring cost of living, these tax burdens make it less attractive for companies and their employees to remain in the city.
The COVID-19 pandemic has also played a role in these relocations. Many firms have realized that they can operate effectively with remote work arrangements and have taken advantage of this flexibility by moving their headquarters to states with more favorable business conditions.
The departure of these firms is a significant blow to New York City’s economy. Not only does it result in the loss of jobs and tax revenue, but it also undermines the city’s status as a global financial hub. The financial industry has long been a pillar of the city’s economy, and the exodus of these firms raises questions about its future as a leading center for finance.
In response, city officials have expressed concerns and have attempted to address the issues driving the relocation. Efforts to reduce crime, improve the business environment, and lower taxes have been discussed, but it remains to be seen whether these measures will be enough to stem the tide or lure back the firms that have already left.
Overall, the departure of Wall Street firms from New York City is a significant development that could have far-reaching implications for the city’s economy. As other states and cities offer more attractive conditions for businesses, New York will need to adapt and find ways to remain competitive in the financial industry.
This is a significant blow to New York’s economy, as these financial firms contribute greatly to its growth and job market.