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Banks to Right-size North American Real Estate Footprint, Expand in China, India in Next Five Years

Survey reveals worker mobility programs, expansion in emerging markets present the greatest profit-generating opportunities

CHICAGO, Dec. 6, 2011 – Corporate real estate executives in the banking industry are right-sizing their North American portfolios to support worker mobility programs, and at the same time seizing upon robust growth opportunities in China and India. According to a survey administered to seven leading U.S. banks and financial services firms representing $2,500 billion in total assets under management and employing approximately 170,000 employees across the U.S. and Canada, strategic corporate real estate portfolio management has the potential to positively impact financial pressures.

“Banks are striving to do more with less, but the real opportunity is to leverage corporate real estate to help achieve enterprise-wide goals,” said Stuart Hicks, President of Jones Lang LaSalle’s banking client group. “It is clear that corporate real estate executives will be under significant pressure to balance targeted growth strategies while managing total occupancy cost.”

Key findings of the banking survey include:

  • South Asia (primarily India) and North Asia (primarily China) will present the banking sector with the most attractive growth opportunities by 2020.
  • More than 40 percent of respondents expect between 16 to 30 percent of their U.S. workforce to be enrolled in a mobility program by 2013, a trend that has the potential to increase employee engagement while lowering operating costs.
  • Managing total occupancy costs, increasing the flexibility of their portfolio and increasing space utilization rates all cited as top real estate priorities.
India, China remain key expansion targets
When asked whether they believe the banking sector will see contraction or growth over the next 12 months, all of the respondents said they expect slow to modest growth, albeit at levels less than two percent.

As banking executives create strategies around their future real estate growth plans, geography will play a significant role in the equation, with emerging markets earmarked to experience the strongest growth trajectory. South Asia (primarily India) and North Asia (primarily China) will present the banking sector with the most attractive growth opportunities by 2020, according to the survey. In the near term, most of the respondents plan to downsize their footprints in North America.

Challenges and priorities of the banking industry
When asked what issues are keeping them up at night, survey respondents’ top answers were cost pressures and figuring out how to both reduce costs and add value for the enterprise.

To address these concerns, these executives are focusing on five priorities (in order of importance) within their overall real estate strategy:
  1. Manage total occupancy cost
  2. Increase the flexibility of the portfolio
  3. Increase space utilization rates
  4. Expand into new markets
  5. Increase the productivity of employees
“The common theme is to create a workplace that is agile enough to keep pace with today’s fast changing society and getting the maximum return on investments in assets, people and space,” said Hicks.

Worker mobility programs key to cost reduction
When asked to identify what presents the largest cost savings opportunities to real estate over the next five years, worker mobility programs was the top selection by survey respondents, followed by other measures that aim to optimize space utilization including portfolio rationalization and tools to forecast space demand.

“Considering that low-hanging fruit cost savings opportunities have been exhausted by most banks at this point, corporate real estate teams are looking to more advanced real estate tactics,” said Hicks.

While not new, worker mobility programs have been pushed to the top of the agenda as a tactic to lower occupancy costs, increase density and utilization rates, achieve sustainability goals and increase employee productivity. Advances in technologies that enable mobility combined with a focus on transformation due to external market pressures are motivating corporate real estate executives to implement worker mobility programs in the near term.

The survey revealed that 100 percent of the survey respondents expect to have at least 15 percent of their workforce enrolled in a workplace mobility program by 2013.

As a result of this increased mobility and other factors including cloud computing and similar technological advances, Jones Lang LaSalle predicts that by 2015, the standard of square feet allocated per average office worker will drop from 200 to estimates ranging from 50 to 100 square feet per person dependent upon the industry sector. Workplace utilization factors will increase to 85 percent versus the 35 to 50 percent levels of today, generating significant cost savings.
Top strategies for long-term success
The banking sector identified the following as the single most critical elements of a successful real estate strategy for the next 10 years:
  • Agility and flexibility: It is essential that real estate portfolios and strategies are able to adapt in real time to a faster pace of changes in the global economic environment, demographics and workforce demands. Likewise, banks need to invest in the right people, infrastructure and processes to encourage and facilitate the quick adoption of new innovative ideas. It is clear that speed of response and nimble real estate solutions will give banks an advantage in an increasingly challenging and competitive environment.    
  • Proactive planning and forecasting: Nearly all the banking executives expressed a heightened need to get ahead of business unit planning. Having early insight into business unit strategies to plan and execute real estate solutions that comply with a longer-term horizon is critical. Looking ahead, the most successful corporate real estate executives will be space prophets for the business units. 
  • Retaining top talent: Enhancing skill sets and fostering an atmosphere focused on talent improvement will be central to banking real estate executives in 2012 and beyond. The sharper focus on talent development extends to both the improving skills of in-house teams and external service providers. 
  • Portfolio optimization: Despite a heightened requirement for flexibility and forecasting tools, portfolio optimization is not diminishing in importance. Banking corporate real estate executives are under more pressure than ever to reduce vacancy rates, lower square feet per person metrics and reduce overall occupancy costs.

“As senior banking executives seek to gain market share through new products, services or markets, their real estate teams will be tasked with getting ahead of these business unit strategies,” said Hicks. “Best-in-class corporate real estate teams will be defined by their ability to proactively plan for and execute real estate solutions that support long-term business goals.” 

For more insight into the survey results from Lauren Picariello, Vice President, Occupier Research, Corporate Solutions, click here. To hear Jones Lang LaSalle’s Tod Lickerman, CEO, Corporate Solutions, discuss how companies can add value and increase productivity through their real estate, click here.

Jones Lang LaSalle helps banks and financial services companies derive the most value from their real estate portfolio. This industry is dynamic, complex and fast-paced; Jones Lang LaSalle aligns its collective knowledge to help clients use their real estate as a competitive advantage. More than 37 of the world’s largest financial institutions trust in Jones Lang LaSalle to help them improve the cost, efficiency and performance of their real estate.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47.9 billion of assets under management. For further information, please visit our website,