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Occupier Strategy drivers: Nordic survey September 2017


Executive summary Tension between strategic goals and cost saving strategies

Nordic corporation leaders are focused on strategies to attract and retain superior employees and help enhance their productivity through innovation and operational excellence. At the same time, they must continually find ways to reduce occupancy costs. The overriding challenge is to balance these goals, which are often in opposition to one another and put to test when acquiring office space. This is the picture emerged from a new survey conducted by Cushman & Wakefield Research and Insight in the Nordics. The survey examined not only location and workplace strategy as corporate value drivers, but also office rental decision’s alignment with the wider business strategy. The results suggest these are only partly aligned due to the view that real estate is only to some degree a strategic tool and therefore sometimes allowing pressure on cost to take priority over other strategic challenges.

Do you consider your real estate as a strategic tool? 60%

29%

11% Yes

To some degree

Cushman & Wakefield Research and Insight

50% see talent sourcing and retention as key strategic challenge

53% see pressure on cost as a key challenge

These findings are echoed in a wider Global study, also carried out by Cushman & Wakefield. The Global survey, dominated by large multi-national corporations, show an on-going tension, and misalignment, between the aspirations of corporate real estate managers and their practical decision-making. The misalignment is due to too often, attempts to advance corporate strategic goals, must take a back seat to cost savings targets. However, without over-exploring the results it suggest better alignment between real estate and wider business strategies in the Nordics compared to what demonstrated globally. Which, if that is the case, implies strength in ability to implement corporate strategies, also in occupancy decisions, yet still with room for improvement to be made.

No

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Strategy alignment, or lack of it Talent attractions and retention sit together on the top of the agenda

How successful are corporations in translating their wider organisation strategy into day-to-day decision making? Based on results from our Global survey, we learn that large multi-national corporations are having a difficult time transitioning from traditional cost centre models to more strategic resource models that support organisational objectives. Talent management and innovation are at the top of CEOs’ agenda, so it’s natural to suppose that commercial real estate strategies would be aligned with those goals. Instead, occupancy cost tops the list of priorities in occupancy decisions, as cost concerns drive the potential for portfolio optimisation.

Key strategic challenges of your company (select top 3)? Pressure on cost

53%

For the Nordic corporations cost savings, talent attractions and employee retention sit together on the top of the agenda, both in wider business challenges and in mind when renting office space. This suggest that also for the Nordics cost aspect does, in many cases, take priority over other key strategic challenges. Navigating in an uncertain environment flexibility is coming in at the third most important decision drivers when renting office space. Coupled with cost pressure this typically materialise in rationalising the core take of space and securing options to call down additional space as and when required.

As for the goal of using office space for corporate branding the impact in rental decisions are secondary. Sustainability is also on the agenda, but falls short, in most cases, when leaders are asked to identify top three strategic challenges.

Talent sourcing and retention

50% Operational excellence

44% Regulatory environment

35% Innovation

35% Customer relations

29% Corporate brand / Identity

18% Sustainability

15% Global expansion

15% Economic / political volatility

Talent management and innovation are at the top of CEOs’ agenda

6%

Cushman & Wakefield Research and Insight

2


Room for improvement Missed opportunity, for many organisations?

It might not be a coincidence that half of the survey respondents have cost saving amongst the top 3 strategic challenges and above 50% have cost saving targets when renting office space. However, 71% do not or only to some extent consider real estate as a strategic tool. Couple this with that around 70% feel the rental process is only partly or not aligned with overall corporate strategy, we view these results as a missed opportunity, for many organisations, for real estate to add strategic value in an environment where the battle for talent is fierce. Drawing on results from the global study a significant 70% proportion of respondents are more heavily focused on reducing cost than on attraction and retention in rental decisions.

How strongly do you feel office rental process is aligned with overall Corporate Strategy?

62%

26%

Strongly

Partly

6%

6%

Not aligned

Not relevant

What are your overall decision drivers when renting office space (select top 3)?

82% 69% 56% 49%

30%

13% Sustainability Image branding Operational Efficiency

Cushman & Wakefield Research and Insight

Flexibility of occupation

Employee attraction & retention

Occupancy cost

3


Location decisions Reinforcement of public transport

Where a corporation locates has direct impact on all of the top C-suite challenges: access to talent, ability to innovate, strong customer relationships, operational excellence, and sustainability. Location selection reveals the ways that strategic drivers are translated into practical decision-making. Whilst in the Nordics cost remains in the top three key location criteria for 82 percent of survey respondents, the importance of proximity (5 min walking) to railway/subway stations is a massive important factor as occupiers increasingly locate where they can attract talent, gain flexibility and enhance operational efficiency. We see the importance of public transportation options across the Nordic region and in fact across entire Europe. However, public transportation options are important to more companies in EMEA and Asia-Pacific than in North America. For large multi-national corporations, the dwindling supply of suitable labour to carry out business operations remains a fundamental challenge for companies, and is addressed by international and local site selection strategies. The global survey responses show a growing preference for occupiers to locate in urban areas that offer strong transportation infrastructure and the opportunity to engage talent. While central business districts (CBDs) are the most sought-after hubs for occupiers, urban areas as a whole remain attractive with majority of respondents globally choosing either CBDs or creative urban environments for their offices.

Cushman & Wakefield Research and Insight

Key micro location drivers at city / metro level (select top 3)? Mixed use environment

Proximity to university

Proximity of competitors

Amenities / service in vicinity

23% Visibility

26% Image of the area

36% Talent availability

40% Cost

76% Public transport accessibility

82%

Location decisions often illustrate the tensions among different drivers and objectives, as companies seek the right balance of cost reduction, talent access, visibility to customers, and flexibility. We view these conflicting objectives as difficult to reconcile outside of core urban areas, which provide access to talent, offer branding opportunities, and enhance flexibility. To meet cost targets, companies relocating to urban areas increasingly adopt agile workplace strategies, making better use of more expensive space. A trend we believe will reinforce with adaption of property technology.

4


Workplace Strong connection between workplace and strategic corporate goals

Leaders around the world recognize that the work environment is an important factor for attracting and retaining talent. Nine out of 10 global survey respondents said the physical workplace is a fundamentally important or critical factor in securing superior workers and enhancing their wellbeing. The vast majority of occupiers see a connection between workplace and strategic corporate goals. Yet, many said their workplace practices fall short of providing a “great place to work” or an ideal environment for attracting innovative workers. The results are echoed in the Nordics, 8 out of 10 said workplace is critical or important in talent retention and the remaining respondents acknowledge this was somewhat important. None responded “not important”. To ensure successful implementation of this critical measure above 80% have firm-wide workplace standards, compulsory or guidance.

The vast majority of occupiers see a connection between workplace and strategic corporate goals Even if not clear from the survey, subjective observations suggest Nordics are ahead of the curve on this topic as more global firms fall short on implementation. However, we are aware of large differences between industries and cities.

How important is workplace in talent retention?

74%

18% 9% Critical

0% Important

Cushman & Wakefield Research and Insight

Somewhat important

Not Important 5


Collaborative & co-working initiatives Companies are still limited to traditional workplace models

Given the extent to which corporations are focused on talent management and innovation, and the role that collaborative and co-working spaces can play in achieving those goals, it’s interesting to see how many companies are still limited to traditional workplace models. Only 15% of the Nordic respondents are providing flexible workspace solutions outside their own offices. However, flexibility within the office has with certainty been established as standard way for working in the Nordics. One third has implemented agile workplace, one third are testing in one or more locations, and majority of the remaining are contemplating.

Around the world, we see Europe taking up agile workplace to similar extent as the Nordics, followed by Asia Pacific and North America being somewhat behind. Have you already implemented agile workplace strategies including desk sharing?

32%

32%

21% 15%

Yes, in several We are testing at Not yet, but locations one / some contemplating location(s)

Not planning to do so

About the survey: The 37 Nordic respondents were predominantly from large firms with above 200 employers operating from more than 5 office locations across several countries. Survey responses came from leaders in several business sectors, technology/media/telecoms and finance/insurance representing the two largest sectors. The Global report can be found here: http://www.cushmanwakefield.com/en/research-andinsight/2017/occupier-strategy-drivers-global-survey-2016/

Cushman & Wakefield Research and Insight

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Håvard Bjorå Head of Research Nordics +47 47 96 96 60 havard.bjora@cushwake.com Rikard Skoglund Head of Business Development – Nordics Occupier Services +46 (0) 8 671 34 36 rikard.skoglund@cushwake.com Marie Cronström Head of Occupier Services - Sweden +46 (0)70 606 41 10 marie.cronstrom@cushwake.com Tor Svein Brattvåg Head of Occupier Services - Norway +47 91 55 70 47 tor.svein.brattvag@cwrealkapital.com Hanna Lamadon Head of Occupier Services - Finland +358 (0)10 836 8425 hanna.lamadon@cushwake.fi Marie Helms Occupier Services - Denmark +45 25 78 28 31 mhe@red.dk

Copyright © 2017 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations to its accuracy.

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Occupier Strategy Drivers Nordic 2017  

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