For more than a century, San Francisco’s One Montgomery Street has been a bank, part of the city’s historic financial center known as “Wall Street West.” It was once home to Crocker National Bank, named for railroad tycoon Charles Crocker, who helped make the city an economic powerhouse.
But the neoclassical building, which dates to 1908, will soon say goodbye to Wells Fargo, which bought Crocker Bank in 1986 and is moving in November to a smaller location across Market Street. Last month, developers bought the building for $82 million.
It’s the latest in a wave of downsizing for Wells Fargo, the fourth-biggest U.S. bank by assets, and reflects the shrinking local financial industry, which was battered by the 2007-09 recession and corporate consolidation. And it’s a physical reflection of the changing economy, in which former banking centers are becoming tech offices or co-working spaces.
Banking is one of the city’s oldest industries — Wells was founded in 1852 during the Gold Rush — and finance accounts for some of the city’s most lucrative jobs. But it has fundamentally changed in the past decade. One of the most lucrative financial jobs didn’t exist a few decades ago: venture capitalists specializing in startup investments.
Banks need less real estate in the age of mobile and online transactions, and some of the One Montgomery space isn’t needed, said Jim Foley, president of Wells Fargo’s Pacific Northwest region.
“When I started in the business 30 years ago, every branch you walked into was massive. You would have all the loan cards, signature cards,” he said. “The needs … have shifted.”
In-person teller transactions have dropped about 10% annually for the past few years, said Foley. But clients still appreciate face-to-face consulting for complex retirement planning or advice on home purchases, he said.
The Bay Area remains a critical region for Wells Fargo, and it’s continuing to hire. About half of Bay Area households use the bank, he said.
Despite the strong economy, San Francisco finance jobs shrank from 45,716 in 2008 to 41,882 last year, according to the Bureau of Labor Statistics. In contrast, technology jobs have more than quadrupled, from 22,108 to 97,486 in the past decade. The biggest technology firms occupy 19 million square feet of San Francisco office space, while finance tenants have only 5 million, according to brokerage Cushman & Wakefield.
The trend has been years in the making, said Chris Thornberg, founder of Los Angeles research firm Beacon Economics.
“There’s been a consolidation in the industry,” said Thornberg. “Finance in general, which used to be huge in California, has been moving to other places.” Wells Fargo’s biggest job center is now Charlotte, with 26,000 employees. Charles Schwab has been growing in Colorado and Texas.
The key factor is the lack of affordable housing, which makes it harder to hire people and requires higher salaries to retain them, he said. That makes hiring employees in lower-cost cities more attractive.
“When you refuse to build housing, tech grows at everyone else’s expense,” he said. “It’s not office rents. It’s a lack of people.”
Foley agrees that hiring in San Francisco is a challenge. “The combination of cost of living and record-level employment makes it harder than it used to be when we’re looking for talent,” he said.
Federal salary data suggest back-office jobs are leaving, while higher earners are staying. San Francisco’s average finance salary, including stock compensation and bonuses, was $281,171 last year, compared with tech’s $229,437.
“It’s probably low-end jobs going away,” said Ted Egan, the city’s chief economist. “Now it’s specialized investment banking, private equity and venture capital.”
Wells Fargo’s scandals around employees opening fake accounts have exacerbated its challenges. The Federal Reserve has capped its assets at $1.95 trillion until corporate governance improves, and the bank plans to lay off 5% to 10% of its overall workforce by 2020. The recent departure of Wells Fargo CEO Tim Sloan came shortly after the bank dropped from San Francisco’s largest private employer to second, with fewer than 7,500 workers. In a sign of tech’s dominance, Salesforce has topped it, with more than 8,600 employees.
Wells Fargo’s Bay Area workforce has dropped by about 10% in the past five years. It still has around 16,000 workers in the Bay Area, making it the region’s seventh-largest private employer, according to San Francisco Business Times data.
As banks recede, tech and co-working space operators have moved in, drawn by the central location of former finance hubs. “The icing on the cake is if the space is convenient to transit,” said Robert Sammons, Northwest research director at Cushman & Wakefield.
Co-working operator Spaces is renovating Bank of America’s former flagship retail center at 345 Montgomery St. and will open a new center there. The bank still has offices in its former headquarters at 555 California St., but tech tenants like Microsoft and game maker Supercell also occupy the tower. A former Bank of America data center at 1455 Market St. is now the headquarters of Uber and Square, which was built on disrupting the finance industry for small retailers. Soon, a WeWork will open in what was once the bank vault. WeWork also leased a Union Bank building on California Street.
Some banks are expanding amid the industry’s broader retreat. First Republic Bank signed one of the biggest leases of the year, with an expansion at One Front Street. It has reported double-digit revenue growth as its wealth management business has benefited from the prosperity of Silicon Valley.
JPMorgan Chase is building a new technology campus in Palo Alto that is scheduled to open next year with more than 1,000 employees.
Adapting to the changing economy means banks need to hire their own software engineers. That can require cultural shifts, such as Goldman Sachs allowing jeans and T-shirts at its San Francisco engineering office, rather than suits and ties, Bloomberg reported.
Franklin Templeton Investments, headquartered in San Mateo, also changed its dress code this year to allow employees to dress more casually, such as no suits and ties, said spokeswoman Stacey Coleman.
It’s still an uphill battle competing for tech talent, said Thornberg of Beacon Economics.
“Who’s going to work for your boring old bank when I can go work for Google?” he said.