Evolving business models within the financial service sector are changing the industry’s commercial space requirements, according to JLL Research’s inaugural Financial Services Operations Centers report. In Florida, these changes are most likely to affect established hubs such as Jacksonville and Tampa, each of which counts finance as a major economic driver.
Over the past several decades, the financial service industry has become more complex. Mergers and acquisitions created megabanks capable of offering a fuller menu of business and personal services, which increased operational needs. Often operations centers were established in a company’s headquarter town to take advantage of the conveniences offered by proximity and centralized management. Sometimes these new centers were housed in regional “legacy headquarters” acquired through mergers and acquisitions.
Now, however, advances in technology are turning that model on its head. Thanks to virtual business, the industry has been revolutionized. Concerns about location have given way to greater concentration on improving operational efficiency through the integration of redundancies across the entire platform. Cloud storage is supplanting brick-and-mortar data centers. Functions such as customer services can now be performed away from an institution’s headquarters in locations where labor availability and wages are more economically favorable.
Already, two-thirds of all financial service office space is found outside headquarter towns – and changes in hiring patterns suggest this trend is likely to grow. Operations functions accounted for 43 percent of the 27,000 job postings JLL Research tracked within the industry. Only 16 percent were in or near the employer’s headquarters.
There is no question that technological advances will continue to shape the way we do business. In the short term, however, as financial services companies continue to adapt to a rapidly changing corporate landscape, we can still expect to see up to 15 million square feet of new purpose-built operations hubs springing up over the next three years in established and emerging secondary markets as well as in unexpected localities. Conversely, the resizing or repurposing of existing office space could shrink the industry’s 150 million square feet of inventory nationwide by as much as 25 million square feet over the next five years. Most of that attrition will be in towns where financial services industry headquarters now operate.