Through speaking to the major global banking groups, we have identified
five forces
which are driving a change in the way they think about workplace
and property, and the extent to which this is already having an impact:
1. Regulation
Banking is now a politicised industry, with public bailouts
and bad press giving politicians the impetus to push
through regulation at a speed which makes it difficult to
reflect on its impact.
The banks we spoke to all highlighted regulation and
compliance as one of the main limiting factors for property,
clamping down on their ability to be flexible and driving the
main headcount increases in the top financial centres. Apart
from the limitations on the types of products banks can
develop and the way they work, the vast increase in regulation
is having a significant impact on real estate and workplace.
Segregation of space has become the norm for showing
compliance, but this goes against the drive towards more
open, flexible, collaborative and innovative work environments.
Banks have told us that regulators are refusing to be drawn
on how new regulations should be interpreted, pushing many
banks to adopt a more conservative interpretation of the rules
in order to ensure compliance. Much of the problem is caused
by the lack of clarity from governments.
Despite this, in some regions, including Australia and the
Netherlands, there has been a widespread introduction
of initiatives to challenge established ways of working.
The extent of the introduction of new workstyles has
led us to conclude that a sea change is underway, with
current new buildings in some banks realising alternative
office concepts for all functions outside trading.
2. Cost pressures
In the majority of cases, margins in the banking industry are
beginning to recover after the significant drop in the years
after 2008. Yet while profits are on the increase, none of the
banks we spoke to during our research believe that margins
will return to anything like 2007 levels.
In an era of very high margins, cost reduction becomes less
important, but banks are now looking much more closely at
the cost of real estate, the second largest overhead for banks
after salaries. Property portfolios are typically highly inflexible
and poorly utilised – with leases of 25 years and utilisation
rates of 45% not uncommon.
Lease events offer a trigger for banks to reconsider their
location strategy, headcount numbers, different models
of off-shoring (moving work to a distant, geographically
disparate company or location with a view to reducing
operation or production costs), near-shoring (transferring
business processes or technology to companies or locations
in geographical proximity) and centres of excellence, as well
as studying their workstyles. In the few years after 2008,
the largest staff losses came from the top financial centres,
but as the global economy stabilises it does not follow that
headcount growth will return to where it was lost. But neither
is off-shoring the most attractive option at the moment.
Regional centres of excellence and near-shoring are winning
in the competition for growth, taking advantage of significant
cost of employment ratios between on-shore and near-shore
locations. This also retains the similarity and resilience of
infrastructure necessary for banks.
However, for banks locating headcount outside of the top
global centres, two key challenges remain. Firstly finding
locations with a strong supply of suitable real estate, and
secondly meeting local laws requiring a physical presence to
operate in some markets.
10
The future of the financial workplace
|
September 2014
