Location, Location, Location….which since March 27th has been home, home, home, with no sign of that fundamentally changing in the short term. It’s been a huge wake-up call for so many businesses, especially in the services sector, where the feasibility of remote working has been overshadowed by the practicalities of mandated remote working, just in order to keep the lights on. Many have flourished, most have muddled on and some have struggled throughout, but as we all adjust to a new normal, could this be the start of a significant shift in where businesses are located….and away from the London-centric clustering we see today?
Corporate location strategy has continued to see a shift towards consolidation into the big cities throughout the UK. For us, as a consultancy business based on the south coast and working closely with clients across financial services and predominately Wealth, we regularly find ourselves on client sites in London, Edinburgh, Bristol and Manchester. We increasingly progress our business development conversations with contacts and attend network events and conferences in the City and while research from Duff & Phelps (1) in January indicated that London had lost its crown as the ‘world’s top financial centre’ to New York, it still remains the hub for financial services in the UK. The shift in media outlets relocating to the north hasn’t been reflected in financial services institutions undertaking similar activities, apart from the odd exception (e.g. HSBC UK moving to plush offices in Birmingham following ring-fencing)
But lockdown has taught us that communal working in large offices may become a thing of the past. Significant investments in prime real estate in the centre of the capital could have already peaked and businesses will now surely struggle to see a return on those investments, with large portions of the workforce working flexibly, thereby reducing the need for dedicated office space for every member of staff. Hot-desking has been a logical first step in reducing occupancy requirements (though that now brings its own challenges), but perhaps it is only now where businesses will assess the true cost of real estate that this will come under the microscope even further. But perhaps it’s not just size that matters (at 5ft 8″, I should know….), but location as well.
Living on the South Coast in the 80’s and 90s and seeing the growth of financial hubs in coastal resorts like Bournemouth, Poole and Brighton evidenced that businesses could build effective satellite centres outside of the capital. JP Morgan opened its Bournemouth operation in 1986 and remains the largest private employer in Dorset (2) with over 4,000 staff onsite. That number has remained relatively static, despite suggestions back in 2005 that offshoring IT work to India could result in 30% of the workforce exiting. Barclays on the other hand has progressively withdrawn from its Dorset hub. Back in 1976, it spent £5m building half a million sq. ft of office space in the heart of the town centre (3), eventually employing over 2,500 people. Today, as roles have moved back into London (specifically since 2005 when its Canary Wharf HQ was built and other work offshored) that number stands at just 500 as much of the building has been sub-let. Only last month though, the CEO of Barclays (Jes Staley) suggested that big offices ‘might be a thing of the past’ (4), bringing into the question the long-term viability of a high rise office block in Canary Wharf. After all, nearly 70,000 Barclays employees have been able to spend lockdown working from home.
So what could the repercussions of lockdown mean upon location strategy in the short, medium and long term? Are we going to see a seismic change in corporate real estate strategy? Probably. Is available office space going to significantly outweigh demand? It seems likely. Is London going to remain a financial services hub and destination for large financial services institutions? Who knows….but well-being, quality of life, mental health, family-time and environmental concerns may well drive businesses back towards satellite offices in less built up areas of the UK, not only leveraging skills and expertise in different regions, but reducing commuting time for many. Lockdown has demonstrated that remote working in disparate locations is not only possible, but for many businesses it has resulted in increased productivity. Perhaps the days of 7,000 people commuting into an office block in London on packed trains and tubes are slowly disappearing and that will be music to the ears of those that regularly embark on a long commute every morning and evening. A shift towards more home-based working and offices in more rural locations may not appeal to everyone, not least because of the slower pace of life; but perhaps that will become an unintended consequence of a virus that has fundamentally changed life as we know it.
At Simplify Consulting, location strategy forms a key part of our operating model framework. We help businesses truly understand where they want to operate from and why, how that will impact upon the bottom line and how it fits with their broader strategy. We help our clients design their target operating model with them and build out the transition steps that take them towards that target in a controlled and managed way. As lockdown restrictions begin to ease and you start thinking about your location strategy for your business, come and speak to us to see how we can help.
Simplify Consulting. It’s what we do.