Commentary

Planning your location strategy

Having a good location strategy allows you to obtain the optimal location aligned to your organization’s needs and objectives. Click to find out more!

January 19, 2017
Business people using digital tablet in lobby

Being in the right location is essential to the success of your business. Good location decisions can significantly boost your organization’s long-term performance. Likewise, poor ones can cost you millions in lost talent, productivity and capital.

Having a good location strategy allows you to obtain the optimal location aligned to your organization’s needs and objectives, one that allows your firm to maximize opportunity while minimizing costs and risks.

Matthijs Weeink, Director and Head of Business Location Consulting at JLL EMEA says, “I’ve seen many cases where poor location strategy has led to longstanding negative impacts for organizations. In one case, a company decided to decentralize to cut costs but leaving their strategic location turned out to be a disaster. Although the firm eventually managed to lower their real estate expenses, the move also resulted in a loss of talent and clients, costing them millions of dollars in the process.”

Taking a leaf out of the tech industry’s book

According to Workspace, Reworked—a report by JLL about technology and its influence in the workplace of the future—we are now living in the third wave of technology where new applications of software will pervade into all industries, transforming businesses and upending long-standing approaches to all our work.

The report also mentions that all companies will become technology companies by 2030.

Coming up with the perfect location strategy is not easy. However, in this technological era, perhaps we could look at tech firms and take a page from their book since they are the ones who are at the forefront of these changes.

The move toward higher quality spaces

The days of tech firms being relegated to less expensive, lower quality buildings are now over. JLL’s recent report, Tech firm office location choice: How does it work in Asia Pacific?, reveals tech firms now account for a bigger slice of the pie when it comes to occupied stock in high quality office spaces.

In fact, we are seeing tech firms occupy more than 20 percent of Grade A space, particularly in several markets across the region such as New Delhi, Tokyo, Bangkok and Manila. In Asia Pacific, one in six square meters of Grade A office space was leased by tech firms in 4Q16 and there is consistent demand for office space in key markets across Asia Pacific, particularly in Sydney.

The Office Development Handbook by commercial land uses authority Urban Land Institute (ULI) says, “Class A space can be characterized as buildings that have excellent location and access, attract high quality tenants, and are managed professionally.” In essence, tech firms are now moving towards occupying the highest quality of office space available.

What are the drivers behind this shift?

Having offices in prime locations will be a big part of the talent strategy.

Access to knowledge and talent pool
Economists have long theorized why companies of a similar industry cluster together—mainly to enjoy economies of scale and to gain access to the talent pool. For many tech companies, clustering in a particular area is a logical strategy to gain access to a talent pool and knowledge transfer.

Take how tech companies are clustering in Silicon Valley—some of the most well-known companies such as Apple, Google and Facebook are headquartered there.

Think about your business and industry; where can you find your biggest competitors?

Talent attraction and retention
As the war for talent continues to escalate, attracting and retaining the right talent will continue to be a huge focus area for tech firms. In particular, having offices in prime locations will be a big part of the talent strategy.

Having offices in prime locations will be a big part of the talent strategy.

“Tech firms recognize the importance of hiring and retaining key talent to the success of their business. Therefore, the location of the office where they will spend much of their working life is critical,” says Christopher Clausen, Senior Research Manager at JLL.

Similarly, JLL’s data shows attracting and retaining talent has been cited as the number one driving factor for tech companies when they consider new office locations. The location of the workplace is a primary consideration for all employees and shall be something organizations look at.

Other factors to look at

There are also other drivers in play when organizations are deciding where to locate.

Supportive government policies include incentives such as tax holidays and rental rebates, and they are particularly attractive to companies. When deciding on a location, do your research. Find out what’s available for your organization and how it applies.

Unsurprisingly, cost remains an important factor. While Grade A offices tend to be on the costlier end, one way is to evaluate what your organization can afford and think about the teams which could potentially shift into decentralized offices as part of a cost-cutting strategy.

Making it work for you

No two companies or industries are the same—what works for others may not necessarily work for you. However, it’s useful to look at tech firms as a guide in moving ahead in the right direction.

Ultimately, the most important step is putting together the right strategy that aligns to your organization’s needs and objectives.

Want more? Talk to the team