The writer is executive director in occupier consulting at CBRE

Corporations have seen seismic shifts in the role and purpose of their real estate in recent years. Historically, headquarters were a place where work was done. Now, they are intrinsically linked to core business priorities such as employee engagement and sustainability, and can also reinforce corporate culture. 

The best headquarters can attract and retain talent, draw teams together, manifest the company’s ESG aspirations to employees and clients, and be flexible enough to adapt to future business change. But delivering this is highly complex and often emotive, requiring multiple trade-offs, particularly in today’s economic environment. It needs a rigorous and structured planning process. But even before that, it rests on a clear articulation of the headquarters’ strategic purpose and aims. It all starts with a vision. 

Learning from experience

New headquarters come up very infrequently and involve major, long-term investment decisions. Cost inevitably remains a key focus. However, these projects raise questions over the headquarters’ purpose and contribution to business success and often take significant time from start to finish. 

The pandemic and the rise of remote working fundamentally changed how employees view the office. While major cities across Europe are reaching more stable levels of occupancy, many organisations still grapple with creating vibrancy in the workplace and enhancing productivity. The best headquarters are the result of significant time invested in understanding how work gets done and creating an environment that gets the best out of employees. Establishing these foundational principles up front can also help ensure the headquarters reflect an organisation’s brand.

While employee experience, sustainability, digital enablement, wellness and inclusion have become critical factors in creating the best workplaces, return on investment in these areas can be subjective. So, leaders are visiting other headquarters to help support decisions about what may and may not work for their own business. These visits are commonplace, and organisations that have recently completed projects are generally very willing to share experiences, both good and bad. 

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Flight to quality

Many companies in Europe continue to seek moderate space reductions, typically by between 10% and 20%. There has been a flight to quality, with organisations vying for the best space. While staying put remains an attractive option, CBRE research from 2023 shows that 45% of office occupiers in Europe are actively pursuing relocation, up from just 18% in 2022.

Europe is also experiencing dislocated real estate markets. Demand for office space in 2023 was well below the long-term average, and 20% to 25% lower than pre-pandemic years’ average (2015-19). However, there is a growing shortage of the best space in the best locations. Limited availability of real estate funding and rising construction costs have made developers either unwilling or unable to start construction without commitments from major occupiers. This is driving up rents for the best space and requiring larger occupiers to prepare many years in advance to secure ideal locations.

While this creates risks for occupiers, it also opens up the potential for greater commercial upside for organisations willing to leverage their balance sheets. We are in conversation with several of them who are willing to consider partially funding the development, or even taking full ownership of future headquarters rather than leasing, in return for a greater share of the upside. 

The growth of flexible spaces

Business unpredictability conflicts with long-term property lease commitments, and today’s weak short-term economic outlook combined with market disruptors such as artificial intelligence makes this unpredictability arguably greater than ever. The growing flexible space market is playing an increasing role in tackling some of this uncertainty. 

CBRE research shows businesses in Europe are forecasting a material increase in the use of flexible office space. They are exploring ‘core and flex’ headquarters which allow them to commit to less long-term space up front, but retain the opportunity to grow into additional space on demand by either partnering or occupying alongside a serviced operator. This is underpinned by an increasingly close collaboration between occupiers, investors and serviced operators.

Given competing priorities and long-term nature of headquarter strategies, deferring decisions might seem the easiest option. However, successful headquarters require an investment in time, particularly at the outset. A great headquarters can physically bring a company’s vision to life. Getting this right can significantly underpin a company’s culture across its entire business ecosystem.

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