Financial firms predict office will remain post-Covid business hub
By forcing millions of people to work from home, the coronavirus pandemic has significantly accelerated the trend towards flexible working, while stimulating debate over the true purpose of the office, with likely repercussions on demand for office space, location and design.
In this massive, unplanned real-world experiment, CEOs and CFOs at private banks and financial firms have found, perhaps to their surprise, that staff’s productivity has generally held up well, if not increased, with many employees relishing the sudden freedom of making their own schedule and not having to commute.
Yet shortcomings have also emerged around mental health and loneliness, with many having to juggle work and childcare. Lack of appropriate office equipment, an inability to physically interact with co-workers, with some struggling to find a barrier between work and home have also emerged as key issues.
While 90 per cent of employees believe the office will remain a necessity in the future, the propensity to work from home post lockdown has greatly increased, with almost 70 per cent of workers in the financial sector wanting to work at least two days a week from home, according to a survey carried out by Savills Office FiT in the UK.
Yet, less than 10 per cent have a strong bias towards working from home four or more days a week, post lockdown. This means the impact on total office space will be “negligible” for most organisations, also considering the potential need for more collaboration and team engagement, according to the property agents.
Going forward, the biggest challenge for institutions will be to find the optimal balance between office and home working. The office of the future will have to be able to attract, develop and retain talent, providing events, experiences and amenities. Technology support through apps, virtual reality and AI will be a must.
The office design will have to be reconfigured to create a place employees want, rather than need to be in, potentially reversing the trend towards high desk space density of recent years.
The office will also have to be a place where corporate culture can be built and nurtured, and collaboration and innovation fostered. With people wanting to commute less, the demand for core locations may also decrease, with suburban areas potentially benefiting.
Hybrid model
“Over the last four months, with more than 90 per cent of our staff working from home, we have been able to sustain a high level of performance, productivity and quality in a work from home environment, more than we might have anticipated prior to the pandemic,” states Teresa Parker, Northern Trust Emea president. A team led by Ms Parker and other several members of senior management is currently looking at the ‘future of work’ at the US bank. A potential outcome may be the reclassification of roles into employee segments, based on the value that remote working could deliver.
“The opportunity to leverage work from home as a workforce strategy for certain roles is a more likely option today,” says Ms Parker. But there is more to understand, such as client demand, employee sentiment, regulatory mandates and business needs over the long-term, she adds.
The need to collaborate, innovate and maintain their culture will lead companies to embrace a hybrid business model, supported by technology engagement tools and face-to-face interaction. “The future purpose of an office will evolve to meet the changing needs of the business, clients and employees,” she adds. At Northern Trust, real estate represents approximately 5 per cent of its expense base which, while significant, is not the biggest “needle-mover” in controlling overall expenses.
The office of the future will need to offer more breakout areas and meeting rooms, states Luiz Severiano Ribeiro, global head of Itaú Private Bank. The office remains key for activities such as brainstorming, product idea development, integrating new teams, onboarding new employees and feedback sessions, which all require team work and physical contact to produce better results.
“We will prioritise collaborative spaces that favour the development of new ideas and look more like a home environment,” he states.
The rapid adaptation to remote work is leading organisations to rethink the function of their physical offices, with the disruption offering opportunity to reduce costs, believes Mr Severiano Ribeiro.
The Brazilian bank had introduced flexible working before the outbreak of the pandemic, in the areas of support and operations, although client relationship managers continued to operate from the office. As the coronavirus hit, thanks to the technological infrastructure in place, the entire private banking operation has successfully shifted to a work from home strategy. “We will continue making the most of this practice in the future, considering the needs and realities of each operation, as well as the possibility of reducing costs.”
The post pandemic work model will certainly include working from home, virtual meetings and event and more digitalised clients, he adds. “The challenge will be to find the ideal balance between in-person and virtual, and clients will play an important role in that outcome.”
Core locations vs suburban hubs
Juggling housework, home schooling and office tasks has been hard for many professionals. But many have gained a higher quality of life, no longer having to commute. “This is a fact that companies will have to recognise. It seems inevitable that more and more operations will move closer to areas with the highest concentration of housing, with offices more widely spread throughout the cities,” adds Mr Severiano Ribeiro.
But in sectors such as private banking, where physical interactions with clients are so critical, the concept of suburban hubs may not necessarily work. “City centres, where employees and clients can get to easily, are still attractive to us,” says Peter Sutton, chief of staff and an executive committee member at Brown Shipley in the UK, part of Quintet Private Bank. A private bank’s office needs to match wealthy clients’ high expectations around location, as well as general design and interiors.
Moreover, with building leases spanning 10 years, offices are a long-term investment and not something “you can switch on, switch off the cost of”, he adds.
Going forward, the individual employee will have a “big say” in what best works for them with regards to flexible working, a practice which the firm introduced a couple of years ago. But the UK bank is not changing any of its infrastructure plans on the basis that less people will be in the office in the future. Moreover, a complete hot desking environment, needed to reduce the number of desks, is “not very practical” in the Covid-19 era with the risk of infection and people’s concerns over sharing equipment.
Decisions will be taken as individual properties leases come up and opportunities emerge, but some trends are already clear. “We will be less keen to sign up longer leases, as property is the second biggest cost that we have after people, and we want to maintain a flexibility around that, as our strategic ambition is to grow,” adds Mr Sutton.
In big city centres like London, people will want to cycle into work, and bike storage solutions and showers will be a must.
One of the benefits of working from home emerging from the Brown Shipley’s internal employee survey was increased savings on commuting costs and food, but this is certainly not affecting the firm’s plans for salaries or new contracts. Office life provides an environment to spark and bounce ideas off people, allowing teams to get together very quickly and get creativity going, which is more difficult to reach in a remote working set-up, despite the mounting number of video and telephone calls.
“There will always be a need for people to come in to the office for at least part of the week,” states Mr Sutton, adding he has not seen or heard anything about flexible working having an impact on salaries in the industry. “Certainly this is not something we are thinking about.”
In Milan, Italy’s main financial centre, major financial firms have moved to new premises over the past two to three years, following real estate innovation projects in areas such as City Life and Porta Nuova, which have become appealing alternatives to the historical city centre, with their glittering skyscrapers and modern shopping centres.
These new office structures are modern, allow an efficient use of working space, are built respecting sustainability criteria and enjoy great locations. It is therefore unlikely financial and insurance groups which are in strong growth mode, having invested in these real estate projects, such as Banca Generali, will review their office plans soon, explains Franco Dentella, director wealth management at the firm.
With the pandemic accelerating the trend toward ‘smart-working’, as it is called in Italy, financial groups will be able to more efficiently use the space available and potentially have room to make new investments, if necessary.
“There may be companies that decide to downsize their office or look for solutions outside the city centre, but it really depends on the growth rate of the firm and on when they have made their last real estate investment,” says Mr Dentella. Demand for office space in Milan was strong before the pandemic, and while it may be partially weakened by the healthcare emergency and the growth of flexible working, it will certainly remain positive.
“There will be a growing demand for improved efficiency and better management of office space, but there will always be a balance between smart working and physical presence, as human touch and creativity are important elements, especially for companies that are growing and are focused on innovation and development.”
The reaction to working from home is different depending on individual circumstances, but clear trends are emerging across countries. In office markets where the typical workforce has more space and spends a lot of time commuting, people tend to embrace the idea of working partially remotely, says Nathalie Palladitcheff, CEO of global real estate investor Ivanhoé Cambridge. But in Asia-Pacific, people are “desperate” to get back to the office because most of the time they live in small apartments with children, and it can be complicated sharing that space with the whole family.
Back to normal
In China, where the pandemic originated and is now apparently under control, bank staff have returned to traditional office working arrangements. Working from home and virtual meetings helped limit the spread of the virus but “office-based work will be a long-term trend” at banks, says Zhang Yu, brand manager in the private banking department at ICBC in China.
Although employees could work from home “efficiently”, job positions that require human interactions, such as relationship managers, are believed to be “not suited to remote work”. Moreover, challenges of working from home included “distractions from family members and entertainment”. Productivity of employees who need teamwork to thrive may have been adversely affected during the lockdown, with professional software and hardware only available at the office.
At the beginning of the year, when the epidemic broke out, Industrial Bank allowed its employees to work from home. Business confidentiality, data security, and the stability of remote office systems emerged as the biggest challenges.
With the virus under control, in March bank branches resumed operations and business management departments adopted a flexible arrangement. Work shifts enabled employees to minimise the risk of pandemic spread. Today, work life has “fully returned to normal”, and all Industrial private banking employees are back in the office, working normal office working hours.
However, the measures taken during the pandemic are still in place today, including regular disinfection of premises, temperature monitoring, and registration when entering and exiting the workplace. Masks are distributed daily and meals ordered at the canteen are delivered to employees, so that they can respect physical distancing.
While the pandemic has had no significant impact on its office set-up, the Chinese bank has seen its cost savings increase, thanks to the reduction of business trips. “In the short term, we have not adapted salary adjustment measures,” says Dai Xuxian, general manager of Industrial Bank private banking.
“However, the impact of the pandemic on the real economy will affect bank profitability, which may influence employees’ bonuses in the future.”
