Perhaps more than any other industry, the financial services sector has been challenged by the simultaneous pressures of intense competition, increased regulation, and margin compression.
Although profits are once again rising for some banks, it is clear that there are still many risks ahead. In this environment, an optimized corporate real estate platform is no longer an option, but a necessity.
This report identifies the elements of our global report that are top of mind in the financial services industry, and it details the most pressing issues facing bank CRE executives.
Although the banking industry was an early pioneer in CRE outsourcing, other industries have caught up, and some have even surpassed the sector in real estate efficiency. As illustrated, one measure of CRE efficiency is the ratio of CRE staff to total company employees. For all organizations in our sample set, the average employment ratio is one corporate real estate professional per 4,000 total company employees. The results indicate that the banking industry may be lagging other sectors and has significant room to improve. In fact, only the government sector employs more CRE professionals per FTE.
Corporate real estate teams across all industries are under pressure to not only cut costs, but also to improve the quality and productivity of the work environment. These opposing demands are especially prevalent in the financial services industry, where there is clear pressure to improve the productivity of the workplace. Banking executives are increasingly aware that the quality of the work environment has a direct impact on their ability to service clients, drive profitability, and attract and retain top talent. As indicated above, the focus on workplace productivity in financial services even exceeds the high levels seen across other industries.
QUESTION: Is your CRE team under increased pressure to deliver workplace productivity?
Banks around the world have indicated that there are two groups which have grown significantly in size and influence over the past two years within their organizations: Compliance and Procurement. From a real estate perspective, compliance teams must be accommodated in dedicated space, but their more significant impact on CRE has been to increase the influence of procurement specialists on buying related to facilities. Procurement teams now have a significant impact on real estate decisions at almost half of our surveyed banks. As indicated below, procurement has a greater influence on CRE in banks than any other industry.
Percent of respondents indicating that procurement is involved on a permanent basis.
Connectivity and collaboration are also critical for banks evaluating their best opportunities for growth. Although recent growth patterns have been slowing, the emerging markets of the world remain as the greatest opportunities for financial services to expand. Formal banking reaches only 37% of the population in emerging markets*, implying that there is significant revenue opportunity. On the expense side, emerging markets present the chance to source and execute critical operations in regions with lower labor and real estate costs.
The areas of greatest opportunity for bank portfolio growth are also areas where real estate transparency is most challenging.
Global real estate transparency 2012
*Reference: McKinsey Global Institute
Source: Global Real Estate Transparency Index, Jones Lang LaSalle, 2012