Technology is redefining financial services real estate

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Fintech, omni-channel strategies are re-shaping real estate demands, re-defining financial centers

As banks continue to recover from the last financial crisis they also face heightened regulation, potential for security breaches and a squeeze on expenses. According to JLL’s North American Banking Outlook, this is having a major impact on their real estate decisions. While banks still represent the largest occupiers of trophy Class A office space in most major cities, the financial services industry is changing its office and retail footprints. Banks are consolidating personnel in less expensive locations, new financial tech companies, or ‘fintech’ players are emerging and retail banks are evolving altogether.

“From a real estate perspective, the financial services sector has become much more complex than it used to be,” said Peter Riguardi, president of JLL’s New York Tri-State Region office.

“We’re seeing divergent needs among different segments, impacting the office, retail and call center markets. The financial and technology industries are converging and this is changing real estate demands.”

JLL’s North America Banking Outlook found that the ‘fintech’ sector is one to watch. These financial services firms whose product or service is built on technology saw a 26 percent year-over-year growth in 2014. Global investment in the sector is on track to reach $8 billion by 2018 as the financial industry embraces companies that could guide future mobile, cloud and cyber security developments. These companies are locating in major financial centers.

“Fintech companies are driving many positive changes in the industry, including how banking and financial services firms think about their real estate,” Riguardi said.

“Innovation is key for any industry, but particularly in this sector because this kind of evolution will be key to determining their long-term footprint and business strategy in today’s market.”

JLL’s report highlights three main trends that are key to watch:

  1. FinTech—the market of financial services firms whose product or service is built upon technology—is growing. Fast.
  2. Firms are turning to real estate to lower expenses in response to rising legal, compliance and security costs.
  3. Customer-centric strategy is the name of the game for today’s most successful banks.

So – what is the outlook for the banking and financial services industry in New York?

Top challenges:

  • Global economic uncertainty, which could impact future market conditions
  • Stringent capital regulations that discourage risk
  • Declining revenue resulting in exit from some business lines

Top opportunities:

  • Growth in financial technology and the compliance side of operations
  • Reorganization and transformation of operation model
  • Improved capital and resource utilization

Explore JLL’s North American Banking Outlook for more specific information about what the future holds for New York’s financial services industry.

WATCH: the below video for more information about the Fintech sector: