| 
Financial services giants like State Street, Fidelity and Putnam have been mainstays of the downtown office market for years now.
But amid fierce competition for retirement dollars that has robotic advisors replacing humans, I wouldn’t bank on any of these major players still dominating the Boston office market a decade from now. Scratch that – make that five years from now.
On the surface, at least, it makes little sense that State Street, Fidelity and Putnam are all busy offering buyouts and cutting jobs at a time when Wall Street is hitting record highs. Fidelity recently offered buyouts to 3,000 workers, targeting employees 55 and older who have been with the company at least a decade. Putnam last November axed 115 employees, or 8 percent of its workforce. And State Street last year announced plans to cut as many as 7,000 jobs by 2020 across the world.
Relentless and remorseless, technological change is a major factor fueling the downsizing, as it has done in so many industries.
Scott Van Voorhis
State Street’s job cutting comes as the giant, focused on corporate and institution rather than individual investors, pushes to automate tens of thousands of manual trades and faxes it fields each year. Mutual fund giants like Fidelity and Putnam are also scrambling to keep up with technological change and a major shift in preferences on part of individual investors as well.
Consumers are flocking to passive index funds, which buy a basket of stocks and hold them over the long-term, capturing the gains in the market. It is an approach that is far less expensive than paying hundreds of millions to hotshot fund managers and their helpers. In recent years, passive management has produced significantly better results than active management. And the passive approach to investing also lends itself far more easily to automation – and “robo advisors.” Electronic record keeping, in turn, has enable financial services firms to purge voluminous file cabinets and paper records as well.
The bottom line for the big financial services players is that they can get by with fewer human beings, enabling them to cut or consolidate expensive downtown office space.
When it comes to shedding office space, State Street has led the charge. State Street recently put 300,000 square feet of space at its One Lincoln tower near South Station on the market and is consolidating another half million square feet from across the city into its new Seaport complex. Fidelity took a big step towards consolidation in 2013 when it sold its long-time Devonshire Street complex near Post Office Square to a developer.
Backtracking Office Footprint
Overall, the financial services giant has steadily reduced its downtown office footprint as well, going from more than 10 locations around Boston to a handful, including its headquarters at 245 Summer St. and the World Trade Center complex in the Seaport.
For its part, Putnam is moving its Financial District headquarters from Post Office Square, where it once had roughly 300,000 square feet, to the nearby 100 Federal Street tower.
OK, it may be hard to imagine a downtown Boston market in which State Street or Fidelity are no longer the 800-pound gorillas. But relatively recent economic history provides a good example of how things can change.
Back in the 1980s, downtown Boston was a major banking sector. Bank of Boston had its own tower – long known as the “pregnant building” – for the way the bottom floors bulge out. Across the street, long since extinct Shawmut Bank had its own rival tower.
Both were competing with the likes of BayBank, New England Merchants Bank and Bank of New England for customers, all long dead now as well.
Traditional banks controlled 6 million square feet of tower space across downtown Boston in 1990, just before the commercial real estate market imploded and took a number of venerable lenders down with it.
But guess what? Boston is no longer the headquarters of any major bank and the only reason I can recall the Shawmut tower is because I have been following the downtown market for a couple of decades now. The only major banking player downtown now is Charlotte-based Bank of America and it has 500,000 square feet – a fraction of the amount of space banks once controlled downtown.
OK, we are not about to see Fidelity or State Street implode anytime soon. But the days when they were calling the shots in the downtown Boston office market are already past.
