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As banks look outside of New York, tech is moving in

Analysts expect a "land grab" from technology companies in New York City if Amazon sets up shop there.
Image: New York City
New York at night from Empire State BuildingMonica Garliceanu / iStockphoto/Getty Images

While San Francisco has long been a stronghold for tech talent and entrepreneurship, technology companies are increasingly seeing the strategic importance of putting down roots thousands of miles away.

Conversely, big banks are increasingly shifting resources, and in some cases, their headquarters, outside of New York City, creating a game of musical chairs for industries that had long been intricately tied to either the East or West Coast.

Amazon is reportedly zeroing in on New York City as one of two sites for its second headquarters. That will likely put “fuel in the engine” for companies looking to set up shop in the New York area, according to Daniel Ives, managing director of equity research at Wedbush Securities.

“When you have stalwarts like Google [which already employees 7,000 people in New York] and potentially Amazon, it will launch a next phase of hyper-growth for tech companies in New York and the broader tri-state area,” Ives said. “It's going to be a land grab.”

AllianceBernstein, which manages $554 billion in assets, is in the process of moving its headquarters — and 1,050 jobs — to Nashville, Tennessee. Credit Suisse said last year it would add 1,200 jobs in Raleigh, North Carolina. Goldman Sachs has established a presence in Salt Lake City in recent years, while Deutsche Bank has expanded its presence in Jacksonville, Florida. Those are just a few examples.

"Moving our corporate headquarters here allows us to offer advantages to our employees that we simply couldn't in the New York metro area," Seth Bernstein, president and CEO of AllianceBernstein said in May. He cited a lower cost of living as one key reason for the shift.

"We're no Amazon,” Bernstein said of the move. “But everyone we've interacted with here has treated us as if we were.”

Big banks may be venturing out, but big tech is ready to create a bigger footprint.

“What happens is when these big tech companies get more integrated into the fabric of local society, it is harder for government entities to lay the hammer on them,” said Patrick Moorhead, principal analyst at Moor Insights & Strategy. “And it’s important that these companies have a New York base. It’s a huge business hub and close enough to D.C. to get on a train and go and lobby.”

New York’s start-up ecosystem is worth an estimated $71 billion and employs 326,000 people, according to the 2018 annual report from Tech:NYC, a nonprofit representing the city’s technology industry. That growth has also been fueled by more than $11.5 billion in funding received last year by New York based start-ups.

"New York has become a city where personalization is valued and coveted,” said Josh Sultan, founder and CEO of Jetson, a New York City-based electric bicycle and scooter company. “Whether you're talking about the arts, food, or even the gym, New Yorkers are all about their own taste at their own pace. In a tech industry that is trending towards personalization, this environment becomes a key inspiration.”

While the cost of living is slightly less expensive in New York than in San Francisco, the city’s tech transformation could create a bidding war between banks and traditional tech companies when it comes to attracting developer talent.

“I would expect wages for all tech talent to go up, but over the long term, I expect more local universities to add tech curriculum to crank out more technologists,” said Moorhead.

Many San Francisco Bay Area companies already have established offices in New York City, including Facebook, Uber, Google, and Twitter.

At 107 years old, IBM is perhaps New York’s only homegrown tech giant, with an office in the city and headquarters located in Armonk, a New York suburb. United Technologies, which owns a portfolio of companies that make everything from jet engines to air conditioning units, invested $300 million last year to create a technology accelerator in Brooklyn, about a 45-minute drive from its headquarters in Farmington, Connecticut.

“It has become a flywheel now that has really started to expand,” Ives said. “I think over the next five to seven years, you are going to see an explosion of tech companies in the 212 area code.”