April 2009 VOL. 2

Investment Notes

Financial services jobs are being more widely dispersed among the nation’s office markets, creating opportunities for commercial real estate investment in new cities. Of 1990’s top 10 financial markets, three have been replaced by new, faster-growing markets, and four of the remaining seven now have a lower concentration of financial employment than they had 18 years ago (see chart below).

Traditional finance-oriented cities like New York; San Francisco; Hartford, CT; and Wilmington, DE, have lost financial services jobs over the past 20 years, while cities such as Charlotte, NC; Minneapolis, and Phoenix have gained jobs in this sector, according to a new report titled “A Seismic Shift in Finance?” by Arthur Jones, an economist at CBRE Econometric Advisors.

In fact, total financial services employment among the top 10 financial service markets as of 1990 decreased sharply as a share of total U.S. employment, declining nearly 20 percent in the past 18 years, according to Jones. At the same time, other major office markets picked up the slack by either maintaining their share of finance jobs or adding to their base.

Jones points out that New York and San Francisco are good examples of this shift away from the clustering of financial jobs. “Both markets have global links – San Francisco to Asia and New York to Europe – that make them geographically and regionally relevant as financial hubs,” he writes in the report. “At the same time, the agglomeration effects that held such sway in the 1980s and 1990s have dissipated, meaning that back-office and support jobs that were once located near financial hubs can be performed nearly anywhere nationwide.”

Though this dispersion may be disappointing for owners of downtown trophy assets in markets like New York and San Francisco, the shift of these jobs may make emerging financial services markets more attractive to commercial real estate investors.

Changes in the Concentration of Financial Employment

1990			2008
Market	Location Quotient	Rank	Market	Location Quotient	Rank
Hartford	2.46	1	Wilmington	2.10	1
New York	2.17	2	Hartford	2.00	2
Wilmington	1.84	3	Stamford	1.91	3
San Francisco	1.75	4	New York	1.89	4
Jacksonville	1.64	5	Jacksonville	1.66	5
Dallas	1.57	6	Charlotte	1.56	6
Newark	1.49	7	San Francisco	1.54	7
Columbus	1.47	8	Dallas	1.53	8
Stamford	1.39	9	Minneapolis	1.39	9
Fort Lauderdale	1.35	10	Phoenix	1.34	10