JPMorgan CEO: Remote Work Will ‘Significantly’ Cut Company’s Need for Real Estate

Article originally posted on CoStar on April 7, 2021

JPMorgan Chase CEO Jamie Dimon said about 10% of his company’s employees will possibly be working from home full time. (Getty Images)

JPMorgan Chase CEO Jamie Dimon said about 10% of his company’s employees will possibly be working from home full time.

In his closely watched annual shareholder letter, financial giant JPMorgan Chase Chairman and CEO Jamie Dimon said the coronavirus-driven remote working trend will “carry forward” and change how the bank manages real estate.

“The COVID-19 pandemic changed the way we work in many ways, but, for the most part, it only accelerated ongoing trends,” Dimon said in the 66-page document. “We learned that we could function virtually with Zoom and Cisco and maintain productivity, at least in the short run.”

Dimon said JPMorgan’s office space will quickly move to a more “open seating” arrangement, where digital tools will help manage seating and needed amenities such as conference room space. That means for every 100 employees, it may need seats for only 60 on average, he said.

“This will significantly reduce our need for real estate,” he said.

Even so, going forward he sees a model where many employees, including nearly all JPMorgan’s retail bank branch employees and those in areas such as sales, trading and critical operation functions, will work in a location full time. Some employees will work under a hybrid model where some days they will work in a location and other days at home. About 10% of employees will possibly be working full time from home for very specific roles, he said.

That’s not stopping JPMorgan from its plans to build its new headquarters at 270 Park Ave. in New York and consolidate even more workers into the building, which Dimon said will house between 12,000 to 14,000 employees. Last year, the company signed a 250,000-square-foot lease in a downtown Houston skyscraper.

Dimon’s letter comes as CEOs from major real estate companies, from WeWork to Columbia Property Trust, said this week at an industry symposium that they are betting on a return to the office as workers across many industries seek out socialization in both the workplace and surrounding areas. While Dimon talks about scaling back the number of seats for some parts of his workforce, the headquarters move shows he is partly in line with the CEOs betting on a strong return to office work.

As much as virtual meetings and working from home are here to stay in various forms, Dimon also called out their “serious weaknesses.”

“Performing jobs remotely is more successful when people know one another and already have a large body of existing work to do,” he said. “It does not work as well when people don’t know one another. Most professionals learn their job through an apprenticeship model, which is almost impossible to replicate in the Zoom world.”

These downsides could “dramatically undermine the character and culture” of a company, he said, adding heavy dependence on Zoom-like video meetings “actually slows down decision making because there is little immediate follow-up.”

“Remote work virtually eliminates spontaneous learning and creativity because you don’t run into people at the coffee machine, talk with clients in unplanned scenarios, or travel to meet with customers and employees for feedback on your products and services,” he said. “While working from home will become more permanent in American business, it needs to work for both the company and its clients.”

Dimon’s remarks came as office vacancy rates in many U.S. markets have hit record highs. In New York, the number of companies opting to sublet their office space increased by more than 40% in the past 12 months, according to a CoStar analysis.

Developer Rudin Management said this week it’s renovating 3 Times Square, also known as the Thomson Reuters building, as anchor tenant Refinitiv’s lease is ending this year.

Even as JPMorgan closed 2020 with record revenue of $123 billion, Dimon said U.S. and European banks have become much smaller in size with the rise of shadow banks and competitors immersed in financial technology.

Their growth “calls for level playing field regulation,” he said.

Dimon also said Big Tech, including Amazon, Apple, Facebook and Google, and now retailer Walmart are also rising as rivals. “At a minimum, they will all embed payments systems within their ecosystems and create a marketplace of bank products and services” with their “ubiquitous platforms and endless data,” he said.

One way JPMorgan is fighting back and adapting to industry changes will be through acquisitions, with fintech companies among its targets, Dimon said.