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With profitability under pressure, the financial services industry is still looking to cut real estate costs. That could be the perfect opportunity for your business center to win new tenants in this sector.
Indeed, last year’s elections did little to alleviate feelings of unease and uncertainty in the banking and financial services sector, Jones Lang LaSalle (JLL) reports. What’s more, new fiscal challenges and ongoing questions surrounding the Dodd-Frank remain sizeable obstacles blocking the path toward growth in the financial services industry.
“Profit pressures and intensifying competition have heightened the role of real estate as both a key driver of revenue and cost to be managed,” the firm reports. “The complexity and diversity of the businesses within this sector will always require a mix of urban, suburban, top tier and back office space. However, the drive for efficiency is fueling a shift away from traditional hub locations and toward lower cost markets.”
Good News for Your Business Center
This is good news for all business centers – but especially those in lower cost markets. JLL reports there is little proactive leasing underway in the banking and financial services sector.
Of course, some firms need to ink deals because their current leases are expiring, but if they don’t have to make a decision they plan to wait until the impact of Dodd-Frank on capital requirements and profit margins is clarified, JLL reports. Temporary office space and short-term leases are ideal for smaller or solo financial service providers trying to hedge their bets, perhaps waiting to sign new long-term leases.
JLL concludes that banks and financial services firms will face “significant obstacles” in the coming years as regulation, the economic environment, new competitors and the Internet challenge traditional operating models. Companies will be forced to adapt and seize opportunities that exist within this difficult business environment.
Focus on Customer Service
“To that end, it will be crucial for the industry to maintain a focus on innovation and customer service and not become bogged down by risk mitigation and compliance mandates,” JLL reports. “Real estate activity will reflect the totality of the cost pressures facing the banking and financial services industry. Expiration dates will force transactions and renewals will be common. Those firms with the capital to relocate will look to consolidate and centralize. Look for the continued migration of support and operations staff to lower the cost of nontraditional hub markets.”
Your business center can target financial service firms large and small in any market. But JLL lists some hot markets for this tenant niche: Boston, Charlotte, Chicago, Los Angeles, New Jersey-Hudson Waterfront, New York City, San Francisco, Atlanta, Baltimore, Cincinnati, Cleveland, Dallas, Denver, Detroit, Houston, Jacksonville, Miami, Indianapolis, Orange County, Orlando, Philadelphia, San Diego, Silicon Valley, Stamford, Tampa, Washington, D.C., and Wilmington, DE.
Especially if you are in any of those cities, you should make it a goal to reach out to financial services firms and communicate the value proposition of executive office suites. You could land tenants on a short-term basis that turn into long-term, loyal customers and even promoters of your brand.
