Exodus Forces Wall Street into Improbable Makeover

Article excerpt

NEW YORK -- It's a world-class case of what goes around comes around. Wall Street demanded corporate America desert many workers, plants and places in the drive to cut costs. Now similar trends have spurred a flock of the nation's premier financial firms to desert Wall Street.

A steady exodus of banks, brokerage houses and insurance companies in recent years has left the capital of capitalism struggling at the very moment the economic system it epitomizes is sweeping the planet.

The departures have become so substantial that they are forcing the skyscraper-packed district to attempt an improbable makeover -- from peerless address of the financial elite to funky enclave for artists and high-tech entrepreneurs.

New Yorkers insist the change will not weaken the city's claim to being America's economic epicenter. But they admit it is unlikely that Wall Street will ever again have the deep ties to the financial industry that once ruled the southern tip of Manhattan and, from it, much of the nation.

"Now you have to say it's New York City that's the financial center because it is no longer Wall Street," acknowledged Robert R. Douglass, former vice chairman of Chase Manhattan Bank, which, until its recent merger with Chemical Bank, was headquartered in the financial district. "Wall Street was once the place you physically had to be if you were in the business.

"That's not so anymore."

In its struggle, Wall Street differs from many other major American downtowns, perhaps especially Boston's. While virtually all suffered from the overbuilding of the 1980s, most are snapping back smartly.

Boston now boasts an office vacancy rate of only 9.8 percent, down from almost 20 percent at the start of the decade, according to Cushman & Wakefield, a national real estate firm. New York's other business center, Midtown, has a rate of 12.2 percent, down from a high of about 18 percent.

By contrast, vacancies at the heart of the financial district, the area from Broadway to the East River and Liberty Street to the tip of Manhattan, remain stubbornly stuck at around 25 percent. (Real estate experts generally consider anything over 10 percent unhealthy.)

But what compells attention is not the bare statistics but the nature of the economic forces at work in the financial district. For the story of modern-day Wall Street contains all the elements that both fascinate and frighten Americans about their economy -- a new communications technology that pulls the world closer together, but also frees companies to move whereever they please; an intensifying competition that produces new products, but also dissolves old loyalties -- even when they are to capitalism's hometown.

"It's like the New England mills," said William Rudin, whose family owns five buildings in lower Manhattan. "Our office buildings are like factories. The financial industry slowed down so we've had to find other uses" for them.

To be sure, Wall Street is a long way from becoming a Lowell or Lawrence, industrial towns that have struggled with only partial success to remake themselves after their main industries left.

Still, Wall Street's problems are huge and humbling, especially because many of them are directly or indirectly of its own making.

Some financial district buildings like 60 Broad St., a short distance from the New York Stock Exchange, are monuments to the excesses of the Eighties.

The 39-story tower was home to the investment house of Drexel Burnham Lambert before its 1990 collapse following the racketeering indictment of its star, junk-bond king Michael Milken. It is now empty. A 30-story, Rudin-owned building across the street at 55 Broad, which also housed the company's operations, recently began catering to small information technology firms and is about half full. …