I wasn’t surprised by Nestlé’s recent announcement that it was relocating to Gatwick after more than 40 years in Croydon.
As the company’s UK chief executive said: “Our new head office will provide a modern, efficient and attractive workplace for our people, in an ideal location.”
More and more we see executives using property moves to accelerate the development of their organisation, whether it’s to modernise the culture, create more productive ways of working, attract the best talent or simply to reduce costs.
In today’s economic environment, corporates are naturally holding tightly onto their hard-earned cash, so investment in new buildings should be relatively rare.
However, surprisingly, there has been a recent flurry of corporate moves, evidencing some interesting trends both in terms of location and the make-up of the head office operation.
For Nestlé, locating next to Gatwick airport is probably driven by the international nature of its business, and a quick look at other recent corporate moves shows similar characteristics.
The magnetic draw of Heathrow is reflected in the numerous multinationals located throughout the Thames corridor – Microsoft, Oracle, BG Group, Honeywell, Reckitt Benckiser, to name but a few – and it can’t be a coincidence that a cluster of head office-related functions have taken up residence in Paddington, including Rio Tinto, Vodafone, Nokia and AstraZeneca.
Stark contrast
There is an obvious and stark contrast with the east of London (Canary Wharf excepted) roll on Boris Island?
Behind the building façade, subtle changes are happening as business leaders think more carefully about the specific needs and costs associated with the various functions that have traditionally constituted a head office.
The core executive team and board has recently become locationally more dynamic, sometimes in response to relatively short-term tax issues, but also driven by a distinct de-layering of traditional head office operations.
Outside the financial sector, many corporates only need a central London office for board members, perhaps with investor relations and some capacity for conducting business with key customers and suppliers.
More and more, other central functions, such as IT, finance, tax, HR and property, are being challenged to consider locating “further out”, where costs are lower but “administrative” talent is still available.
And following the pattern set by customer-facing call centres, there is also a third layer of staff, including accounts, payroll and IT support, that are being located or outsourced in shared service centres even further afield, somewhere between the M25 and India.
The headline from Nestlé for the property industry is a move from “Croydon to Gatwick”, but behind the scenes there will undoubtedly be a lot more going on.
To justify the expense and risks associated with business disruption, major moves must be a catalyst for significant corporate change.
pc@corporatepropertyadvisers.com
