A CBRE survey of top corporations finds that a desire for talent is starting to override cost-based decision making, and UK second-tier cities, seen as untapped pools of talent and attractive places to work, could benefit
People issues are rapidly rising up the corporate agenda as worries about costs abate and the war for top talent heats up.
And the result could be good news for the UK’s second-tier cities, according to a CBRE survey of some of the world’s largest companies.
The agent’s annual European Occupier Survey polled its biggest clients on the key challenges for 2015 and how these would affect their location decisions and workplace strategies.
While fears over weak economies – cited by 56% of respondents as a “main challenge” – is still top of the corporate agenda, concern over cost escalation has fallen markedly, dropping by 11 percentage points to 50%.
Instead, “people issues are coming to dominate”, according to CBRE’s report, which found that in almost every area of corporate real estate strategy attracting and retaining staff were becoming the main issues.
Asked about their main challenges, a third of respondents cited labour and skills shortages, up from a fifth last year.
But when asked about the key objectives of their workplace strategies, attracting and retaining staff came out even higher, with 67% citing it as a key objective, “by some distance the most widely cited motive for workplace strategy”.
By contrast, the number of firms citing workplace programmes aimed at cost savings as a top priority fell by 13 percentage points to 43%.
In making location decisions, transport infrastructure and local amenities were critical factors, reflecting “the underlying importance of labour” and acknowledging the “need to select amenity-rich locations that appeal particularly to younger cohorts in the workforce”. Again, these factors were second only to cost in the league table of locational decision factors.
Meanwhile, onshoring and offshoring decisions were also starting to be moulded by a desire for better customer service, with rapid wage inflation in emerging economies also impeding the flow of businesses considering relocating away from Europe.
What will be the effect of this increasing emphasis on people, albeit at the right price?
Richard Hoberton, a senior director of EMEA research and consulting at CBRE and one of the report’s authors, says it could be good news for some UK regions, which have in the past lost out to London’s allure.
“In order to reach the necessary labour at a good price, companies will start to look at second-tier cities or smaller towns for labour, places that they may previously have assumed offer an inadequate skills pool for their purpose,” he says.
While London is often seen as the only UK city capable of providing a sufficient depth of talent, particularly for technology companies, CBRE says its recent experience of working with clients in the tech sector suggests that some are now looking further afield to “untapped locations”.
“The experience is that there are more locations than might initially be thought which have the skills base to support such activity,” the report says.
There is some evidence of this taking place already: regional office markets in places such as Manchester and Bristol enjoyed their best performance for several years in 2014.
Knight Frank Bristol partner Martin Booth says: “When the economy picks up and things get hot in London and the South East, people look to the regions. Bristol, in particular, is attractive because of its skilled workforce. We have already seen interest here, mostly from the TMT and legal sectors.”
The question for 2015 will be whether this potential exodus from London can trickle down further than just the UK’s major regional cities.
Or as CBRE’s report puts it: “Location decisions are becoming much more dependent on where labour is – or can be persuaded to move to.”
