Go to just about any mid-sized to large city and look at the large buildings downtown. Frequently the tallest are bank buildings. Tall buildings downtown is the most expensive real estate one can buy/rent. Why do they do this?
I understand why banks used to have a large presence downtown in the past. They needed to be near all of the business.
These days, all the big money moves electronically. Many of these buildings don’t even have a customer-serving access to them. The ones that do could easily be served by a much smaller branch.
Also, they are far away from their workers. For most of these mid-sized cities, all the workers live in the suburbs and have to commute to the downtown every day.
So, they aren’t near their workers, they aren’t serving their customers better with a big building downtown. So, why pay so much for this real estate?
ETA: I’m not talking about NYC and the Wall Street area, that is a completely different situation.
Just like most big downtown buildings, the majority of the space is rented out to other companies. The bank owns the building and makes a profit on the office space so they get to put their name on the top.
Also, you realize big banks employ a lot of people that don’t work in the local branches right?
Because the banks own the buildings and get to put their name on them, making them the top tier level of branding efforts. The buildings often have as many different tenants as any other, although the owning bank might have as much as a third or half of buildings in their home cities.
I don’t think you can assume that the name on the building corresponds to the owner. A lot of times, the name on the building is just one of the tenants. Sometimes, this is the largest tenant, but sometimes a smaller tenant might negotiate the right to put its name on the building.
It doesn’t matter that banks move money electronically. Most of a bank’s business lies in serving customers, which means businesses who require daily attention more than individuals. Processing loans is a huge endeavor and involves a person looking at documents and making decisions. There are probably individuals or teams assigned to every large customer to deal with their everyday needs. Investing the money that comes in is another job-hungry task. Going after people who are behind on their loans is another large group. Whenever you have large sums of money moving around you require large numbers of people watching over that money every step of the way. How the money moves is irrelevant.
For a really large bank, this is tens of thousands of people. Chase has about half a million, and you can see its organization chart is massive.
I’ve lived in two cities that had banking as major industries*, and in one of them I worked for the bank in question. In both, certain aspects (computers, trust operations, network support) of the bank’s business were decentralized. But adminstration, legal, retail management, corporate management, retail operations all tend to have a high need for centralization and fancy schmancy offices with windows that overlook the skyline. It’s probably 80% tradition and 20% actual functional necessity at this point.
*And in retrospect, it occurs to me that when I lived in each of them, all four of the cities I’ve lived in in my life had bank buildings as the tallest downtown buildings.
In many cases they are near their customers. Large commercial banks have large, commercial businesses as customers, a large number of which are located downtown. There’s also the need to have quick access to city hall, the county courthouse and other places where the bank needs to file paperwork.
Finally, my downtown happens to have a Department of Defense-level internet infrastructure underneath the streets, which makes for easy, fast and reliable data transmission. (It’s been one of the city’s best tools for attracting high-tech businesses downtown.) There’s a lot more behind the location than whose name goes on the building.
Isn’t that the whole point of a “downtown”? A central location with a good transportation infrastructure, suitable for businesses with a large number of employees?
Maybe. I would frequently say insufficient infrastructure because everyone is fighting traffic so that they can all be densely packed for a few hours. After that they fight traffic to not be next to each other.
I’m just wondering how many bank customers walk from their downtown business to the bank’s downtown skyscraper to conduct meetings? Probably very few. If so, they are not there for the customers.
The other reasons given make sense to me, branding or they already own the building, so they rent it out.
As mentioned, the bank is often not the only tenant or even a major tenant of a building with their name on it.
But hostorically, banks liked big buildings because big buildings convey a sense of solidity. Being in it for the long haul. One of the things many people are looking for in a banking relationship is confidence that the institution will be there in 5, 10, 30, 100 years. Of course, the massive consolidation over the last 25 years kind of shoots that to hell but I don’t know that banks are building a lot of new giant downtown buildings these days.
And not all banks took this approach. Wells Fargo’s corporate headquarters, for example, is a dinky little (relatively) 12-story building in San Francisco’s financial district barely bigger than the Bank of Guam next door. When I worked there a decade ago it was interesting to be sent to other cities where often the Wells Fargo building was the biggest in town and invariably it was because Wells Fargo had bought whatever bank had originally built (or leased) it.
As for location, again as mentioned banks have a lot of customers other than people walking in to deposit their paychecks. And those big customers tend to also be downtown. But also, if not there then where? You mention that all of their employees are generally living int he suburbs but if Wells Fargo wanted to move out of San Francisco and into one of the suburbs which one should they go to that wouldn’t make it even more inconvenient for most of their workers? Getting downtown from Pacific may be a pain in the butt but it would be a lot worse to try and get to Vallejo.
But often a lot of back office functions for banks are in more remote (cheaper) locations. Chase has something like 30,000 people in giant business parks north of Columbus, Ohio.
Monumental bank buildings are cathedrals of commerce that serve as cornerstones of social and economic stability.
Prior to industrialization it was cathedrals, then as time became important to industrial civilization it was public clocks, and then as the modern financial system took precedence it became bank buildings.
It’s not just banks - look at the headquarters of Boeing in Chicago.
That’s a big damn building and I doubt very much anyone is assembling airplanes in it.
There’s a LOT of overhead that comes with running any large company.
Probably more than you think. (Although many would take cabs.) The point is that people are always taking meetings and that you go to where the money is. And people want to talk with other people face-to-face when money is involved. That’s why poker is played around a table, when it could just as easily be done by computer and Skype. The cards aren’t the point: the people are. Being in the same room as those you’re doing business with remains overwhelmingly important.
Which is why the most important part of that “infrastructure” is public transit.
Also, downtown property has value because it’s centrally located. Transportation infrastructure in cities tend to be radial, designed to feed people from a large metropolitan area into a small downtown area. If instead you built your office building in the suburb, people living immediately around your office will find it convenient, but everyone else will have a much longer commute.
Agreed. Banks want to attract the brightest and the best, and have as large a pool of potential employees to choose from as possible. You will attract many more employees if you plonk yourself in the middle of a populated area, rather than at the far end of it.
There’s also prestige. Let’s face it, no one goes into banking for the creative glamour, you choose it for the money and the status. A big flashy office in the centre of town is part of that prestige.
I understand your point though. I commute to a company that is not in the suburbs, but it is far from the downtown area. They have asked me if I would like to take a job in the downtown area. I told them if that if they make me do that I will quit. To me the 1+ hour commute is not worth it. It seems to me that being downtown will dissuade just as many as it attracts, but I guess everyone views it differently.
