Location: What if financial services never come back fully? They’re the main leaser of top-flight space.
Mr. Alexander: I don’t believe that that scenario is really a plausible scenario, and I’ll tell you why. At the end of the day, maybe the shape and the form are a bit different than they were in the past; but if you look at the last 80 years, financial service firms have evolved dramatically, right? I mean, investment banking, quote unquote, in some way, shape or form, has been around for almost a hundred years. … So what I do believe is they could morph, they could change. When you have change, certain industries, as they change shape, may restructure and downsize. I also believe come the next three to five years, there are various slots that need to be filled. So there’s going to be smaller firms, like a Greenhill or Blackstone’s now getting into the investment banking, etc., that are going to fill the niche.
But do these new firms need that much space?
Currently, no. But the trend has been, obviously, the industry has grown over the last 18 years. They don’t need as much space as the giants. But I think that the giants that are here now will stay—the Goldmans, the Merrill Lynches, the Morgan Stanleys. They’re not going out of business.
Will they stay in their present size? Won’t they contract?
I don’t believe they’ll contract [permanently]. These industries do work the world over. So there’s always need to finance infrastructure or various sovereign governments, giant corporations—I mean, these are major, major institutions that require a lot of people to service them. So, does it change? Are the levels of compensation going to stay the same, go down a little bit? [laughing] That’s going to be a big change.
I was going to ask about that. But can you give me a sense of the pace of dealmaking now as compared to a year ago—literally, how busy?
I think our company’s very busy. We’re busy in a different manner because, obviously, the demand side of the equation has temporarily been dislocated because of the disruption in the financial markets, lack of liquidity, etc., that’s occurred. We look at this and say this is going to be a relatively short-lived phenomenon. Is that six months? Is that nine months? Is that a year? Good question. Wish I could answer it—because I could’ve saved myself a lot of money in my investments [laughing].
But I think the issue that you see now is one more of companies reshaping; there’s probably—if I were to guess, and I know that my particular business, which is a corporate business—it’s more about restructuring, credit bankruptcy issues, and availabilities of space: What’s the sort of disposition strategies that companies can employ over the next 12 months to shed? So, there’s going to be a lot of issues like that.
But, also, they’re looking at the future and they’re looking at their facilities, and they’re planning on, ‘What will I look like in the next two to three years?’
You represented a lot of banks, including Lehman Brothers. Did they expand too fast? Did anyone inside of their organizations know the risks they were taking?
Let me put it to you this way: The studies and the transactions that we were involved with for a firm like Lehman Brothers, they had population—it was never that they took excess capacity; it was all filled. Relative to their business model, I think, truthfully, at the end of the day, Lehman Brothers was a scapegoat.
Really? Why do you think?
Well, you tell me. How come you don’t save one company that needs some help, and you decide, on the other hand, [you help] various companies we have examples of, ranging from $150 billion to $45 billion? And the truth is, when Lehman was let go, so to speak, it created a whole other level of turmoil within our marketplace. And I think that if the government had to do it over again they would opt to go in a different direction.
And try to save Lehman?
I think so.
I ask this in all seriousness: Business has slowed down—what do most commercial brokers do with their time right now? I imagine it varies, but what are their days like?
I run a couple of agencies—I’ve got some young brokers who are very busy pounding the sidewalks; the type of deals are a bit smaller and shorter term, but they’re out there working very hard and showing the space, drumming up the business. The senior brokers—just over the last week … I’ve got teams of 10 to 15 people working for three major institutions doing renewal, downsizing strategies, outsourcing strategies, and disposition strategies in a significant manner.
I can’t really get into it. But they’re big institutions.