Banks of the future need to fundamentally change the size, shape and location of their property portfolios in order to adapt to the challenges of talent retention, technology, geography, cost pressures and increased regulation, according to a report published by DTZ.
The report, carried out in conjunction with consultancy Unwork, is the culmination of more than 100 interviews with senior figures in the banking, property and HR industry and makes predictions on some of the potentially seismic changes which will take place in the sector in the coming years.
The global financial crisis has been a wake-up call to the banking industry which had largely ignored workplace environments and property due to the certainty of large profits and consequent salaries and bonuses. Increased costs and regulation coupled with reduced profit margins have resulted in cut-backs as well as a new approach to property portfolios and workspace.
Talent and technology are two of the major driving forces behind predicted changes made within the report. More than 50% of employees are now engaged in IT and technology-related roles. This means banks are now not only competing with other financial institutions for staff but with the likes of Google and Microsoft, companies that have spent the past decade investing heavily in creatively appealing workspaces to attract talent. With employees listing workspace followed by salary as their top priorities in any job, banks are losing their traditional place as employers of choice and will have to work harder to attract new staff.
In order to meet these challenges in an open era, banks will start to invest significantly in their workplaces and work technology, offering better environments and more flexibility in the same way the other industries have done in the past 10 years. There will be widespread introduction of agile working, and an increase in the ability to operate away from the office for most functions.
Footfall in retail branches will continue to fall at dramatic rates, forcing banks to respond with a whole new model of retail banking. Retail banking’s saviour will be customer interaction, and as banking goes digital the physical space will need a new raison d’être. This will lead to more consumer-focused branch designs, where customers can socialise, drink coffee and work as well as bank. The report also predicts the rise of a hub and spoke location model, in which only city-centre branches will offer full services with a network of kiosks and pop-ups to replace the suburban branches.
From a head office perspective, banks will consider moving out of traditional Central Business Districts (CBDs) and locating core functions in mixed used, vibrant, connected urban environments (CUEs). They will consider moving towards the ‘horizontal high-rise’, out of their traditional CBD environments, into places offering convenient access to retail and high quality restaurant offerings. In these locations, the Banks and similar financial institutions will be able to attract the best talent in the future. Simultaneously, they can continue to occupy statement buildings, maintaining the ‘building as the brand’ tradition.
Rob Yates, Director of Office agency at DTZ based in Manchester, said: “The fundamental changes caused by the impact of the global economic crisis have had far-reaching effects into the banking sector. This coupled with changes in consumer demand and the rapid and continuing technology evolution mean property portfolios and workspaces need to adapt accordingly.
“One challenge for banks is around the vast increase in regulation which is having a major impact on their real estate. Segregation of space and function has become a norm to show compliance however this goes against the drive towards flexible, innovative and collaborative work environments. The institutions which best manage this dichotomy will be best equipped for future success.
“It is therefore likely that workplace environment will play an increasingly important role in relocation decisions and a shift away from the sterile anodyne building of the past looks inevitable.
But do the report’s findings resonate with the Manchester and wider North West office market?
Rob continues: “Whilst the DTZ and Unwork report predominantly focuses on the central London market, in Manchester we are seeing similar trends but going one step further; it is not just banks and financial institutions which are undergoing a shake-up, it extends to law firms, accountancy practices and other professional services firms which have a large presence in the city.
“Add to this the expansion of the insurance sector and the migration of traditionally London-centric institutions to the City, Manchester is fast becoming the preferred relocation option for organisations relocating from the south east. Trader Publishing and Ford Capital have recently taken 59,416 sq ft and 24,753 sq ft respectively at First Street and Towergate Insurance have taken 34,775 sq ft at 3 Hardman Square whilst Slater Gordon have taken 107,182 sq ft at 58 Mosley Street. These transactions represent 17% of total take up, a significant addition to the business sector in Manchester and essential for the city’s growth. Occupiers are having to work hard to attract and maintain the quality and number of staff which involves much more than a focus upon the aesthetics of a building as employees become increasingly discerning.
“To ensure that the expanded operation can capitalise upon the improved access to talented staff that Manchester can offer, decision makers want retail and dining facilities on their doorstep, onsite coffee bars, flexible work spaces and concierge services within a dynamic and vibrant environment. Furthermore, the region has the highest number of business and finance graduates outside London and it is this part of the workforce in particular that are attaching increased importance to the working environment.
“The challenge now is how to continually meet these demands. Developers are responding to the demand and improved market conditions, four schemes have started on a speculative basis during 2014 with an another two schemes due to start in 2015, both on the back of a prospective pre-letting. The totality the new schemes will deliver 1,032,931 sq ft of new stock, the future of the professional services workplace in Manchester is looking bright.”
