Is it time to relocate?

When most business people envisage a corporate HQ, images of marble reception areas, lavish floral arrangements and hallways lined with corporate art spring to mind.

But the future of this type of prestigious, city centre HQ building may be under threat thanks to increasing costs and security concerns. A new survey of corporate property managers by GVA Grimley has found that the economic slowdown and the fallout from the events of September 11 have caused a sea-change in attitudes towards the location and type of HQ.

Post-September 11, security concerns now weigh heavily upon those responsible for corporate property decisions. We questioned property managers in 50 of the UK’s top 250 companies. Over half (52%) who presently occupy a city centre HQ building said that they are worried about the safety of their HQ building. For London occupiers this figure rises to 67%. These concerns are so great that over half (52%) of the property managers felt that safety issues could make them change the location of their HQ.

Similarly, a large proportion were unhappy about working in tall buildings and thought that having an HQ located in a central business district put them at greater risk of terrorism.

It is possible then, given these concerns, that UK companies will follow the example of many US corporates and relocate their HQs out of central locations into the suburbs or business parks. London, Manchester, Birmingham and Edinburgh could see corporates leaving their city centres for literally greener pastures elsewhere.

However, any moves are unlikely to be entirely driven by security worries.

The economic downturn has made many companies look at their property costs.

After salaries, property is generally regarded to be the second largest fixed business overhead. If companies can make cost savings by relocating to a HQ with cheaper rents they will – 60% that had recently relocated said the move was cost-driven.

Given that city centre rents tend to be higher than suburban or business park locations – and add to this the security worries surrounding city centre locations – it is likely that city centre occupiers will at least consider a move elsewhere. The question is where are they likely to go?

The survey respondents gave several key criteria that a potential HQ location should meet. Surprisingly, these can be met just as easily by non-city centre locations as by central business districts. In general, the prestige of the location and its proximity to clients got a lower rating than good transport links, overall costs and the availability of skilled labour in determining where respondents would want to locate their HQ. Transport came out top in influencing location choice.

Although developments in technology such as web and video conferencing and email have replaced some face-to-face contact, it is still vital that business people and their clients are within easy reach. An increasingly global client base now makes proximity to international air routes a necessity, rather than an optional extra, and was frequently mentioned by respondents.

Road transport links were also mentioned – mainly by those who were currently based in the North of England and Midlands, where a greater number of respondents were located in the suburbs or in business parks out of town.

Given that transport and cost were such vital influences on location preferences, it is hardly surprising that London lost its top billing to the South East region in terms of preferred HQ location. There were some harsh words from those surveyed when asked about the desirability of London for the location of an HQ, mainly concerning its poor transport links. Perhaps this can best be summed up by the respondent who said: ‘We need to be able to get around and we can’t get in or out of London.’

But the capital is fighting back, with new urgency now apparent on the part of the mayor, government and the Strategic Rail Authority. There is now a real commitment to new transport initiatives such Crossrail, the Channel Tunnel link into St Pancras and the extension of the Docklands Light Railway to London City Airport, all of which should improve getting around, and to and from, London. However, these improvements alone will not outweigh the security and cost issues that many business people feel is incurred by locating in a central business location such as the City or West End.

London may well see its companies locating to King’s Cross or Paddington, both of which will have improved transport access due to the initiatives described above, or out of London entirely.

It is clear that areas of the UK which offer the best transport links – especially those with good access to airports – will be the likely beneficiary of any relocations from city centres. If companies do relocate out of city centres and to suburban or greenfield business park sites, what type of HQ will we see? It is evident from the responses that the days of the opulent 1990s HQ are numbered. Cost concerns are increasingly driving property decisions and employees will have to acclimatise to less glamourous surroundings.

Although 70% of respondents recognised that the type of company premises contributes towards employee motivation, only 8% of those surveyed plan to offer any additional staff facilities, for example a gym or onsite shops, in the future.

This strongly indicates that the new generation of HQs may be more functional and less ostentatious than previously. Indeed, if Marks & Spencer can make the tricky decision to move out of Baker Street, it is highly likely that others will follow.

The government must nevertheless drive forward transport improvements if UK plc is to avoid running the risk of losing its global HQs to cheaper, more accessible cities in mainland Europe.