Finance Hubs Become More of a Focus

DALLAS—What types of employees are being hired, where are the employers located and how is the industry evolving/? As the region increasingly grows, particularly in the finance industry, employment hubs have become more of a focus. These are some of the areas explored in the recent JLL Financial Services report.

With so many new lines of business, the challenge becomes how best to integrate functions to be more efficient, serve customers at the highest level and effectively manage costs, the report says. At first, this integration was basic. It was all about the expanded companies being on the same platforms for main functions such as accounting, financial reporting, compliance and the like. But true efficiency is more complicated—and has taken time to achieve.

Despite this list, substantial overlap exists between functions in today’s financial services companies. For example, credit card services and payments are inseparable, as are wealth management and investment services. Likewise, operational jobs such as customer service and technology cross multiple business lines, making integration across the entire platform mandatory.

While integration has been a long-standing corporate goal, it is only in the last several years that technology has emerged that allows for meaningful advancement, says JLL. It has taken years to get to this point, but the groundwork has finally been laid for different systems to communicate with each other and automate routine tasks. Financial records can now be quickly, accurately and centrally reconciled, for example. Customer service can be accomplished in sometimes remote locations from a headquarters base—especially where labor availability and wages make it easy to do business. This is evident in the rollout of automated bank branches, where teller services are centrally located in a contact center anywhere in country and accessible to the customer from a big screen.

One hard truth, however, is that integration is a complex process. Many institutions are still working through combining legacy acquisitions and functions into a cohesive whole, the report points out. But functions are moving fluidly from city to city and this is shaping location decisions. In addition to DFW, established operation hubs are in Atlanta, Phoenix, Charlotte, Chicago, Tampa, Wilmington, DE, Jacksonville, FL and New York City. Based on JLL’s review of many of the larger US financial service companies, almost two-thirds of office space is located outside these headquarters towns. The larger financial institutions occupy more than 150 million square feet of office space across the United States, with almost 100 million square feet located outside of headquarters cities. These outposts, located in select US pockets, are often doing important operational work for those companies.

Given the need to drive efficiency through integration, a portion of this space may be resized as companies digitize functions, allowing operation consolidations. Some companies may even choose to leave established headquarters locations in favor of lower-cost environments as a way to retool operational efficiencies and manage costs. Not only are location decisions from 10-plus years ago being rethought, but space commitments from even a few years ago are being reconsidered. Specifically, what functions should take place in those locations—and even whether the newest of the locations are still needed for a company’s current direction.

Data centers are a prime example, JLL points out. Many companies built data hubs during the last several years to integrate operations. Today, cloud storage has revolutionized the industry. While the new brick-and-mortar data centers are still state-of-the-art, the rapidly changing tech landscape has some institutions reconsidering that strategy.

As a result, during the next five years, corporate office space needs could be reduced by 25 million square feet. A large share of this will take place in headquarters markets as growth/expansion continues in the secondary/emerging and unexpected operations hubs. New and expanded operations hubs could total 10 to 15 million square feet in the US (3 to 5 million square feet annually).

Near term, all of these operations hubs will benefit because consolidating operations centers allows tapping into specific local talent pools that are already concentrated in those locations. As existing space is resized/repurposed and new operation hubs are developed to integrate functions, technological change will still be shaping the industry during this period.

For example, operations that now take place in California may be a better fit in Texas, given talent availability, wages and operating costs. In addition, even established and expanding hubs such as DFW may have current or future functions shifted to other markets as technology, location advantages and operational strengths evolve.

“When it comes to these financial services operating centers, the question becomes how do they become more efficient and how do they meet the customer’s needs? These industries are rapidly changing their operations to become more efficient and technology plays a big role in making that possible,” JLL’s Walter Bialas tells GlobeSt.com. “DFW’s backbone is in a wide range of technology. Tech talent is all over the metroplex, but it’s especially concentrated between the Tollway and US 75 in the north central Dallas area, right along the old tech corridor, and also throughout the Tollway and even into Las Colinas. From data security to app creators to web designers to data analysts, this is very much technology driven.”

With change being certain, financial services institutions will be working to optimize operations. While a challenge, opportunities will be created when identifying the right balance between headquarters and operations space.