Hsbc’s Decision to Stay in London Highlights the Attraction of City Property Despite Growing Costs

Paul Statham, founder and CEO of workplace management experts Condeco Software, outlines how businesses can respond to the pressure to maintain London offices

Paul Statham

HSBC is in the process of implementing a £3.4 billion savings drive, but the attraction of an office in London remains high, as the multinational company recently announced that their headquarters will remain in the capital.[1] The business benefits available in London include access to a highly-skilled pool of international talent, as well as HSBC’s more specific considerations, such as London’s internationally recognised regulatory framework and legal system in the financial sector. These factors continue to make London the global centre of choice for many firms, despite the high costs associated with space in the capital.

The price tag for commercial property in London is continuing to rise. New figures from London property company Workspace Group showed that rental costs per square foot of office space rose 13 per cent between April and December last year, as demand from business owners outstripped supply.[2] Whilst the business benefits of London offices remain strong, many firms are unable to support the rising costs and are choosing to re-examine their workspace requirements. For instance, 63 London law firms relocated last year, reducing their space and reorganising their offices in order to offset rising costs. This figure represents a 19 per cent rise in the number of relocations since 2014.[3]

Business leaders, and particularly those in the beleaguered financial sector, are increasingly facing up to tough decisions as they are under pressure to deliver cost-cutting measures whilst retaining their key business operations. In this tough economic climate, it is essential that decision makers have a clear view of the space they need and how their employees are using it. Our research shows that on average, companies only use 39 per cent of their space. This means that many businesses are paying to maintain office space which they simply do not use, and could find significant savings through re-evaluating how much capacity they actually need.

Developments in workplace technology mean that reorganisation of office spaces can be based upon clear evidence. Occupancy sensors, for instance, indicate how many desks are regularly used, and how many are now redundant in an age of flexible working. This insight into the way their offices are used gives leaders the perfect opportunity to reduce their real-estate outlay, delivering cost-efficiencies that may well secure their long-term future in the capital.

The choice facing business leaders whose companies are struggling to maintain expensive inner-city property is not necessarily as simple as ‘stay or go’. Instead, understanding their current utilisation of space provides decision makers with the opportunity to make significant efficiency savings. Research at global financial services firm Barclays showed that 20 per cent of their desk space was unused at any given time and that there were between 20-30 per cent of no-shows for booked meeting rooms. This was a significant problem for Barclays with constant pressure to provide additional facilities at premium rates. Implementing workplace management technology enabled Barclays to increase their office space usage by 20 per cent, making considerable cost-efficiencies.

There is clearly a lot at stake for businesses as they make decisions about their workplaces. Not only does the location of an office building entail significant consequences, but the amount of space and the way in which it is organised present other complex issues. As they face up to these questions, business leaders should take full advantage of technological advancements that provide accurate data about their office-space needs. The decision to retain property in London can indeed be balanced effectively with a drive to cut costs.