Y’all Street: Could Dallas oust New York City as a global financial capital?

Economy reporter

The document’s title holds a dire warning for Wall Street — the place, not the stock market: “AT RISK,” it says, is “New York’s Future as the World Financial Capital.” The 2015 report, by business group Partnership for New York City, proceeds to lay out the reasons that the Big Apple is slowly losing its grip on the finance industry, as major players in the sector shift operations elsewhere. “New York City remains the preferred headquarters of the global financial services industry,” the report says. “Among the largest private sector employers, however, there is a growing trend to move jobs and business operations to lower cost, more business-friendly environments.” So where are those jobs going? Dallas, of course. Well, a lot of them are, anyway. Though the report listed competition from “emerging financial centers in the developing world” as New York’s No. 1 “threat,” Dallas ranked second on a Forbes list showing New York’s top competitors for those jobs within the United States, behind Phoenix. A Texas Economic Development Council report published last year found that the industry has grown by about 15 percent in the state over the past decade, which is the biggest increase out of the 10 most populous states. Last year, Dallas-Fort Worth’s financial sector jobs grew by 4.7 percent — more than double the national rate, according to the Bureau of Labor Statistics. Experts in corporate recruitment and site selection say that as technology improves, physical proximity to an industry hub is less important -- and, of course, it’s just much more expensive to do business in New York City than in Texas. That has resulted in a major hit to New York City’s middle-class tax base. The report cites mind-boggling housing costs and trends within the financial world that have required institutions to hire more people to focus on complying with new rules rather than just on making money, along with aging infrastructure as reasons companies are fleeing or cutting jobs. And officials in other states, including Texas, have been aggressive about luring any jobs that might be up for grabs with promises of plentiful land, incentives and lower costs of living. In North Texas especially, it’s paid off in the form of gleaming new corporate campuses, complete with thousands of high-paying positions. Liberty Mutual Insurance is building a 5,000-job campus in Plano and State Farm recently completed its 8,000-worker regional office campus in Richardson. In addition to relocating its North American headquarters to Plano, including auto finance operations, Toyota also recently chose Dallas for its heavy equipment financial services arm. Observers of D-FW’s economy say its status as a financial center is creating a new problem for employers: a boa constrictor-like tightening of the labor market. “A lot of times, you’re going to have to find someone that’s working for one of your competitors [and offer them] more perks, flex time, whatever the situation is,” said Mark Malone, senior regional president in Dallas for recruiting firm Robert Half. “I’ve been in the Dallas market for 17 years and I’ve never seen so competitive a candidate market.” In D-FW, Malone said, unemployment in accounting and finance is about 2 percent, which means that “more companies are looking to hire than there are financial professionals available.” That’s why the quality of life a region can offer — good schools, less rage-inducing traffic, more affordable housing — is typically a top consideration for companies looking at potential sites for investment. “When it comes to the talent pool, there are two considerations: Am I moving to a place where the most talented of my existing workforce will want to move?” said Joseph Vranich of California-based Spectrum Location Solutions. “The second is that the quality of the workforce is more vital the greater the specific talents that are needed.” For example, Vranich said, if you’re looking for nuclear engineers, you might consider moving to Princeton or Pittsburgh. “If you’re moving a financial operation, you’re concerned about college graduates,” he said. King White, CEO of Dallas-based Site Selection Group, LLC, said that within the finance industry, there are different types of skill sets that tend to cluster in different areas. Dallas, for instance, has fewer stocks and securities workers than some other markets, but in the subprime mortgage, mortgage and auto finance areas, “Dallas does great,” White said, adding that a lot of similar subprime mortgage servicing has moved from Southern California to Phoenix. Santander Consumer USA in Dallas, GM Financial in Fort Worth and Capital One in Plano are all major players nationally in auto finance and employ thousands of workers locally. He said Dallas’ specialization stems from the late 1990s, when firms made initial “huge” technology investments. “As the technology has improved, it’s allowed people to move operations with a lot more fluidity,” he said. That fluidity has allowed more markets to climb through a sort of “natural progression up the food chain,” constrained to some extent by things like travel accessibility (which D-FW has) and infrastructure. “New York used to be that mega-market with all the best talent, but people have migrated out of that geography,” he said. “Other markets, with technology and everything else, make New York kind of irrelevant.” That progression  is being mirrored internationally, White said. “If you assume a place was once a hotbed for low-end call centers, then management moves in, then you’re doing shared service centers, it’s really a natural progression,” he said. “You could look at India and the Philippines ... the U.S. is a little more complicated, but at the end of the day it’s the same situation.” Now, White said, businesses that are considering sending work to Dallas are “hungry” for projections about the future labor market in an effort to stay ahead of wage inflation, which would narrow the cost benefits of moving operations out of, say, New York City. “That’s the biggest challenge in some of these high-growth markets: Companies have to be really careful about the long term financial benefits,” he said. “Our housing costs — you’ve seen what’s happened.” Sally Bane, executive director of Plano's economic development department, said she's not worried. The suburban business power house has a high concentration of financial services jobs;  Bane said it's expected to be the city's largest and fastest growing job sector in the long term. Those jobs, she said, pay an average of $90,000 per year, which translates into discretionary cash that's pumped back into the local economy. But although Plano pitches itself as a "prime location for financial services companies," she said, the city has "very intentionally" tried to balance out its job base. "What that does is cushion you against any kind of economic shock you may experience from an industry downturn," she said.
July 29, 2016

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