CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JANUARY 31, 2025 OR THEREAFTER
BY THOMAS D. ELIAS
“'EXPERTS’ MISS THE POINT ON MOVING WELLS FARGO’S HQ”
Every published analysis of
Well Fargo’s Christmas-week decision to sell its longtime headquarters
high-rise deep in San Francisco’s financial district has missed the entire
point.
Speculation has been rife
that the huge California-centered bank plans to move its corporate headquarters
out of San Francisco, where it been since Gold Rush days and the Pony Express
era. Guesses for a new headquarters have included Minneapolis, Dallas,
Charlotte and New York City, where Wells Fargo’s president now keeps his main
office.
That came about because
Charles Scharf joined Wells Fargo from Bank of New York Mellon and didn’t want
to move. At the time, Wells Fargo had just completed a new “branch hub” complex
along the Hudson River and Scharf moved into it.
So talk of Wells Fargo
shifting its headquarters is old stuff, since the company already has a very
diffuse headquarters structure, with yet another major complex in Minnesota.
The “experts” bemoaned Wells
Fargo’s shift in San
Francisco and the upcoming sale of its 420 Montgomery Street building as a sign
that California will soon be a has-been as a financial center. That’s hokum.
So long as this state retains
anything near its current stature as the world’s fifth largest economy, it will
need to have a significant banking structure even if bank leaders keep offices
in other cities, too. Big banks like Wells and Bank of America, another
California native whose nominal headquarters are now out of state (in
Charlotte), will need big employee bases here.
But like other white collar
industries including insurance companies, law firms and stock brokerages, they
saw many of their workers – even at executive levels – switch to working at
home during the Covid 19 pandemic. So the businesses no longer need as many
employees in their offices as often as before. It translates to billions of
square feet of vacant offices, even if Tesla, Space X and Twitter/X owner Elon
Musk disapproves and wants to call his own workers back to their old cubicles.
That’s not happening even at
his companies, which have seen large-scale employee departures since Musk began
making those demands. Example: Tesla last year saw a 44 percent departure rate
among its executives, about five times the normal turnover rate for large
corporations.
The Wells Fargo move has to
be seen in its overall context, not merely as a banking move. (In fact, Wells
officials said of San Francisco that “The city remains vital to us. It is very
important to the bank.)
What’s happening is the same
kind of real estate turnover that’s affected other office-centric businesses.
Wells Fargo in 2023 sold one of its major San Francisco buildings, at 550
California Street, for $45 million, taking a loss of more than $200 million
from what it paid for that structure in 2019, just before the pandemic.
Wells Fargo’s experience is
similar to what’s happened to other office tower owners, with real estate
investment trusts having lost billions of dollars when hundreds of tenant
businesses left their old leases in the pandemic’s dust, exiting as fast as they
could.
Now Wells is doing the same.
Its workers will still come to an office sometimes. One common practice is to
hold meetings and make plans at company headquarters, with workers carrying out
those decisions largely from home offices.
Recognizing this reality,
state legislators last spring passed a new law making building conversions into
apartments and condominiums far easier than before, almost automatic.
This is the best way yet
devised to solve much of California’s housing shortage, with new living units
created in existing structures without altering the physical character of
cities or neighborhoods.
So the Wells Fargo building
sale and move actually is part of a trend, just not the trend many financial
and real estate analysts think they’ve spotted of yet another big corporation
moving headquarters out of California.
Sure, Wells Fargo will have
significant offices elsewhere; it has had many of them for a long time. But the
trend that’s really at work in this move is the switch from office-centric work
environments to home offices, which has been underway now for almost five
years.
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Email
Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough,
The Most Promising Cancer Treatment and the Government’s Campaign to Squelch
It," is now available in a soft cover fourth edition. For more Elias
columns, visit www.californiafocus.net