There may not be a more aggressive purveyor of traditional office culture in the business world than Goldman Sachs’ CEO David Solomon. Throughout the pandemic, he’s pushed Goldman employees for a full return to the financial giant’s many offices. He was quoted at the Credit Suisse forum in 2021 as saying about remote work, “I do think for a business like ours, which is an innovative, collaborative apprenticeship culture, this is not ideal for us. And it’s not a new normal. It’s an aberration that we’re going to correct as soon as possible.”
Solomon and Goldman Sachs’ return-to-the-office push has had some roadblocks since the pandemic started. Solomon said the investment bank operated throughout 2020 with less than 10 percent of its employees in the office. But the setbacks haven’t deterred Goldman Sachs from its return-to-office pursuit. Solomon said in 2021 that he worried about an incoming class of about 3,000 new recruits that wouldn’t get the direct mentorship they need by working remotely. The pandemic helped push the adoption of digital tech and ways for the bank to run more efficiently, but Solomon vowed remote work wouldn’t lead to any huge changes for Goldman Sachs over the long term.
As the threat of COVID has waned, Goldman Sachs appears to be getting its wish granted, to a certain extent. The bank has led the post-Labor Day charge for an office return, along with other Wall Street firms, and it has dropped its COVID safety measures, including vaccine, mask, and testing requirements for employees outside New York City. The company reasons there’s significantly less risk of severe illness from COVID and has cited the latest guidance from the Centers for Disease Control to back up its claims. A Goldman Sachs memo directed workers to “speak with your manager to ensure you understand and adhere to your division’s current return to office expectations.”
The memo indicated the company wanted a fuller office return from employees after Labor Day. As some companies have embraced hybrid and remote work, Goldman Sachs has not let up on its push for a robust return to the office. The bank has called employees back to work several times since the pandemic started, though the recent memo suggests not every employee has been coming in five days a week. Goldman’s memo is like one from Morgan Stanley, who also announced they were ending tests and other COVID safety measures as of September 5th. Though much of Wall Street started 2022 working from home, big banks and financial firms like Goldman’s have become some of the biggest proponents of in-office work. And the post-Labor Day push appears to have had an effect, at least temporarily, unlike in the past two years.
According to one recent survey, forty-nine percent of New York City workers returned to their desks between August 29th and September 13th. The survey is based on 160 major Manhattan employers conducted by the Partnership for New York City and the Metropolitan Transportation Authority. That figure is up 38 percent from April’s numbers, and it’s expected to pass 50 percent by the end of the year. Most workers (42 percent) were back in the office 3 days a week, while 12 percent of workers returned to the office four days a week.
Average Daily Office Attendance between August 29 and September 12, 2022, in Manhattan, by Industry Sector
|Industry sector||Average office daily attendance rate|
Real estate, unsurprisingly, had the highest office attendance, with 82 percent of employees back in the office daily. Law firms (61 percent) and financial services (56 percent) were the next on the list. But despite the spike in numbers, the post-Labor Day push may be losing steam. Office occupancy in 10 cities tracked by Kastle Systems fell slightly to 47.3 percent in the week ending September 21st, down from 47.5 the week before. Even if the occupancy numbers are temporary, it doesn’t appear financial firms like Goldman Sachs will back down in continuing to get more employees back to their desks.
Skin in the game
Big banks are all handling the return to the office slightly differently. Investment bank Jeffries said in a staff memo it wants employees back on-site on a “consistent basis.” Jeffries CEO Rich Handler and President Brian Friedman noted in the memo they’re not “going to look at individual names on turnstiles,” but the staff’s consistent in-office presence is necessary to “truly maximize our fourth and final quarter and the future that is ahead.”
Behind the scenes, executives like JPMorgan Chase’s Jamie Dimon have reportedly grown more aggressive about a crackdown on remote work. The New York Post reports Dimon has been quietly telling senior managers he expects rank and file employees to be at the office 5 days a week, a stricter standard than the company’s official policy of 3 days a week. A source told the Post, “The worry is if people aren’t in their seats five days a week, those seats could be moved from our team. If someone’s not there, it makes it a pretty easy decision to fire them first.”
Like Goldman’s Solomon, Dimon emphasizes that banking is an apprenticeship model, and employees must collaborate and work together in person. JPMorgan Chase is also building a multi-billion-dollar global headquarters at 270 Park Avenue in Manhattan. The 70-story building will take up an entire city block, house as many as 15,000 employees, and is expected to cost about $3 billion. Dimon and JPMorgan execs understandably don’t want that new, shiny skyscraper to sit partially empty.
JPMorgan is also a major investor in NYC real estate, so lower office occupancy rates affect the bank directly. There’s the ideological belief that staff is more productive in the office, but getting a fuller return to the office sets an example. If they can influence getting office occupancy rates higher in New York City and elsewhere, it will help JPMorgan’s investments.
The same can be said for Goldman Sachs. Goldman’s has a Real Estate Asset Management division specializing in the full investment cycle of property types such as office, multifamily, and industrial. It would be odd if a company that invests and manages investments in office assets wouldn’t be behind a full return to the office.
Earlier this year, Goldman Sachs Asset Management raised $3.5 billion for its Real Estate Investment Partners program from a diverse group of institutional and high-net-worth investors. The program has a global mandate and focuses on investments in sectors including logistics, residential, and office buildings. Goldman Sachs Asset Management is one of the largest real estate platforms globally, with more than $50 billion in capital invested since 2012. Like JPMorgan, Goldman has skin in the game regarding the value of office assets, especially in New York City. Getting its employees back to the office full-time only makes sense when considering that.
Despite the popularity of remote and hybrid work, Goldman Sachs has expanded its national and global office footprint. The bank recently landed $18 million in economic incentives to build a new office building north of downtown Dallas. Once completed, the company will hire and house 5,000 employees in the building. The 800,000-square-foot office will be built around an 11-acre development with a 540-unit luxury multifamily complex. Goldman is also doubling its Miami office footprint. The bank signed a 35,000-square-foot lease at Southeast Financial Center in downtown Miami, a hot real estate market where Goldman’s has been based since 1988. The recent lease is the company’s latest expansion into South Florida, as the firm opened an office last year at Related Companies’ 360 Rosemary in West Palm Beach.
In June, Goldman Sachs is upgrading its space in Atlanta and moving into Simon Property Group’s new Buckhead office tower. The firm has leased 36,000 square feet in the 13-story office building that overlooks the luxury Phipps Plaza mall. The firm is also relocating its Atlanta office from Monarch Plaza, where it leases 13,000 square feet, though it’s unclear when it’ll make the move. And overseas, they are preparing to sign a 10-year-lease for office space in Birmingham, England, following the trend of Wall Street firms expanding beyond London in the wake of the pandemic. The customized space in Birmingham will house 800 employees, and the move-in date should be early 2024. Goldman Sachs already has an office in London, home to about 6,000 employees.
True believers in the office
The bottom line is that Goldman Sachs and many other financial firms are strong believers in the office. The company has proved its commitment to in-office work and its distaste for remote work through its company policies, executive public statements, and moves to expand its office footprint. Financial firms like Goldman and JPMorgan have significant investments in office real estate, so it makes sense that they’re pushing for full-time office returns.
Wall Street banks and financial firms are different than other industries, like tech, in that the work that gets done is more collaborative and requires more of an in-office presence. Wall Street firms have an apprenticeship culture where junior bankers need more on-site training and mentoring, so the push for a return to the office likely won’t let up among these firms.
Still, not every financial firm has been as aggressive as Goldman in return to office policies. For example, firms like Citigroup Inc. and Apollo Global Management Inc. have opted for softer, hybrid work policies and haven’t been as aggressive in a post-Labor Day push for an office return. Deutsche Bank also continues to implement a hybrid policy established earlier this year. Deutsche Bank employees can work up to 40 to 60 percent of their time remotely based on their role, activity, and country.
Banks like JPMorgan and Goldman’s have also faced some pushback on their remote work crackdowns. Earlier in 2022, junior bankers complained about David Solomon’s return to office mandate in an online message board that leaked to reporters. Many junior bankers appeared to threaten to leave Wall Street for the tech industry if remote working privileges were curtailed, though it’s unclear if that sentiment was widespread or if any employees actually acted on the threat. Solomon has also admitted that his campaign to get more workers back in the office could take years.
“It’s going to take some time, you know; behavior shifts take time generally, and I think over the course of the next couple of years, our organization will generally come together,” Solomon said. About a half of Goldman’s roughly 50,000-person workforce is in their 20s, Solomon said, a generation that craves flexibility with work. The banking CEO has also noted his return-to-office push isn’t as “binary” or aggressive as most reports make it out to be. Solomon still believes in flexibility and said his insistence on in-office work has been portrayed as much more dogmatic than it is.
Even if Solomon and Goldman Sachs aren’t as hardline on their return-to-office policies as reported, the lesson for office owners and landlords is that some industries are much more apt for a better return to the office than others. The tech industry has been a leading office consumer over the past decade, and many big tech firms, like Google, are still big believers in the office.
But tech firms have been impacted by remote work more than most industries, and you can look no further than San Francisco’s lagging office vacancy rates for evidence of that. Wall Street banks and financial firms can be solid office tenants, as many of them push their employees to return to their desks and expand their office footprints nationally and globally. In a topsy-turvy office market, landlords and investors know they have a friend in large, global finance firms.