Advertisement

SKIP ADVERTISEMENT

Empty Floor at Goldman Puts Change on Display

Goldman's glass-walled sixth floor in its headquarters near the Hudson River has largely become vacant as the firm consolidates office space.Credit...Mark Lennihan/Associated Press

When Goldman Sachs moved into its new tower near the Hudson River in 2009, the sprawling trading desks on the fourth, fifth and sixth floors were some of the most active and lucrative in the world.

Now, nearly six years later, the glass-walled sixth floor — stretching much of a city block — has become something of a ghost town, all but empty save for a few still-occupied offices. Goldman’s trimmed-down trading operations are now consolidated on two floors instead of three.

The emptying out of the sixth floor this year is a sign of the declining expectations for growth in a financial industry that is being challenged by new regulations and quickly changing technology that is making fewer traders necessary. At an industry conference last week, executives from other big Wall Street banks said they expected their trading revenue to fall roughly 5 percent in the current quarter from a year ago.

The reorganization at Goldman’s Manhattan headquarters is particularly notable because the firm is seen as the shrewdest trading house on the Street. While other banks have been shrinking their desks, Goldman — which has not publicly disclosed the emptying-out of its sixth floor — continues to have ambitions for the kind of trading that went on there.

The move to consolidate people on the fourth and fifth floors was partly driven by a desire to have traders work in closer proximity to promote collaboration, said Goldman executives, who spoke on the condition of anonymity.

Still, revenue growth at the firm has been difficult, and Goldman executives say that because of all the pressures that the firm and the industry are facing, even successful firms have had to economize and rely on technology, rather than humans, wherever possible, leading to reductions on the trading desks that used to occupy the sixth floor.

Goldman’s overall head count has not changed significantly, and the firm does not give any other details on its staffing levels. But the firm has talked about adding to its compliance, technology and legal staff, requiring cutbacks in other areas.

More broadly in the financial industry, banks have eliminated over 20 percent of the front office head count from their Wall Street operations since 2011, according to the industry data and analytics firm Coalition.

These reductions have often necessitated big real estate shake-ups, such as UBS’s recent announcement that it was leaving its massive United States headquarters in Stamford, Conn., for a few floors in a building owned by another bank. 

The Manhattan headquarters is not the only place where Goldman is taking up less space.

Across the river, in a Jersey City tower that Goldman built for itself and opened in 2004, the firm has recently finished renting out a bit less than a third of the 40-story building to Royal Bank of Canada and New York Life.

As recently as 2012, Goldman was the sole occupant in the Jersey City building — the highest building in the state — but parts of the tower were empty at the time. Since then, when the firm has added staff members, it has chosen lower-cost locations like Salt Lake City and Bangalore rather than the New York area.

The changes in real estate have been one of the factors that have helped Goldman reduce its costs by 17 percent since 2010. This has allowed the firm to keep profits stable even as revenue has been unsteady.

The buildings in Manhattan and Jersey City were designed in an era before the financial crisis, when Wall Street was growing swiftly, partly because of the high-powered trading desks that were helping pump up the housing market and other assets.

At the time Goldman planned the new Manhattan building, internal projections had the firm growing to 50,000 people from the 31,000 it had in 2005, according to people close to the firm.

The crisis damped those expectations. Yet even in 2010, when Goldman moved into its new building, the bank was in the midst of something of a temporary postcrisis rebound and the teams moving onto the sixth floor — part of the bond trading division — gave themselves extra room in anticipation of growth.

After that, though, the industry rebound faltered and new regulations came into effect. One set of rules, included in the Dodd-Frank financial overhaul, banned banks from most types of trading with their own money — what is referred to as proprietary trading — something Goldman had a reputation for being particularly good at. Goldman eliminated those proprietary trading desks at the same time that it continued to make surgical cuts and move further toward automated, computer-driven trading.

It now seems clear that Goldman is unlikely to meet those early projections that had it getting to 50,000 employees, with staff numbers hovering around 33,000 over the last few years.

The empty seats became increasingly glaring and at one point last year, Lloyd C. Blankfein, the bank’s chief executive, mentioned to one of the heads of trading at the firm, Pablo Salame, that the gaps were unsightly — and potentially unproductive — a Goldman executive said.

Soon after that, Mr. Salame ordered that everyone on the sixth floor be moved to the two floors below.

One impediment to the move was that the fifth floor did not have enough window offices — a treasured privilege of Goldman’s much-vaunted partners. Rather than do without, some partners chose to keep their offices on the largely empty sixth floor.

Another problem was that the increased population on the two lower floors taxed bathroom facilities built for fewer people. More toilets were eventually installed. Nonetheless, some traders still go up to the sixth floor when the lines become too long, creating some of the small amount of activity in the wide-open space.

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: Empty Floor at Goldman Puts Change on Display. Order Reprints | Today’s Paper | Subscribe

Advertisement

SKIP ADVERTISEMENT