Key methods to reduce real estate costs for financial and large scale occupiers
Finance is still the largest tenant sector in Asian CBDs. The sector faces pressures that will not dissipate soon, so cost control is important. Various methods of saving real estate costs are open to financial and other large occupiers. We have grouped these methods under four headings.
Use of flexible workspace is now a very viable option, given the uncertainty about financial groups’ future headcount needs. Certain city sub-markets offer a particular concentration of flexible workspace sites, e.g. Causeway Bay in Hong Kong.
Further decentralisation is an option for larger occupiers, notably in Hong Kong and Tokyo, which have the widest gaps in rent in Asia between the CBD and outer areas. However, decentralisation is feasible in Shanghai and Singapore also.
Technology-driven measures include adoption of cloud-based working models and major rationalisation of bank branch networks (permitted by further shifts to online service and further automation).
Finally, owning buildings rather than leasing them currently looks attractive. Persistent low interest rates make this option cheaper, while in the finance sector ownership is encouraged by regulatory issues such as resolution planning.