Talent and technology to drive radical shake-up of financial workplaces

Banks of the future need to fundamentally change the size, shape and location of their property portfolios in order to adapt to the challenges of talent retention, technology, geography, cost pressures and increased regulation, according to a report published by DTZ.

The report, carried out in conjunction with consultancy Unwork, is the culmination of more than 100 interviews with senior figures in the banking, property and HR industry and makes predictions on some of the potentially seismic changes which will take place in the sector in the coming years.

The global financial crisis has been a wake-up call to the banking industry which had largely ignored workplace environments and property due to the certainty of large profits and consequent salaries and bonuses.  Increased costs and regulation coupled with reduced profit margins have resulted in cut-backs as well as a new approach to property portfolios and workspace.

Talent and technology are two of the major driving forces behind predicted changes made within the report. More than 50% of employees are now engaged in IT and technology-related roles. This means banks are now not only competing with other institutions for staff but with the likes of Google and Microsoft, companies that have spent the past decade investing heavily in creatively appealing workspaces to attract talent. With employees listing workspace followed by salary as their top priorities in any job, banks are losing their traditional place as employers of choice and will have to work harder to attract new staff.

In order to meet these challenges in an open era, banks will start to invest significantly in their workplaces and work technology, offering better environments and more flexibility in the same way the other industries have done in the past 10 years. There will be widespread introduction of agile working, and an increase in the ability to operate outside of the office for most functions.

Other factors impacting work environments include increasing automation of job functions and digitalisation of customer services and products. A study by Oxford University predicts that by 2020, 20% of the banking workforce will be automated. This, coupled with significant current under-utilisation in many banking property portfolios – 45% is not uncommon – and the need to be more cost conscious will drive major changes in real estate.

The report predicts there will be a shift in banking sector property driven by desire to increase product sophistication while concurrently reducing overall portfolios. Traditional banks, which have the most complex and mature product offer, also occupy a huge amount of real estate – as, historically, proximity to customers through local offices and branch networks was the only way to grow the business. At the other end of the scale, online-only banks have a low product complexity, but almost no physical footprint. Through technology, it will be possible for banks to break the link between physical presence and market presence, to have a highly-complex product offer with a small property portfolio.

Footfall in retail branches will continue to fall at dramatic rates, forcing banks to respond with a whole new model of retail banking. Retail banking’s saviour will be customer interaction, and as banking goes digital the physical space will need a new raison d’être. This will lead to more consumer-focused branch designs, where customers can socialise, drink coffee and work as well as bank. The report also predicts the rise of a hub and spoke location model, in which only city-centre branches will offer full services with a network of kiosks and pop-ups to replace the suburban branches.

From a head office perspective, banks will consider moving out of traditional Central Business Districts (CBDs) and locating core functions in mixed used, vibrant, connected urban environments (CUEs). They will consider moving towards the ‘horizontal high-rise’, out of their traditional CBD environments, into mixed use places like King’s Cross in London. In these locations, they can form a symbiosis with the local community, crucial for attracting the best talent in the future. Simultaneously, they can continue to occupy statement buildings, maintaining the ‘building as the brand’ tradition.

James Maddock, Head of DTZ Global Occupier Services, EMEA, said: “The fundamental changes caused by the impact of the global economic crisis have had far-reaching effects into the banking sector. This coupled with changes in consumer demand and the rapid and continuing technology evolution mean property portfolios and workspaces need to adapt accordingly.

“One challenge for banks is around the vast increase in regulation which is having a major impact on their real estate. Segregation of space and function has become a norm to show compliance however this goes against the drive towards flexible, innovative and collaborative work environments. The institutions which best manage this dichotomy will be best equipped for future success.”