March 10, 2014 4:56 pm

Designing the corporate headquarters can be pricey

Employees walk in front of a pyramid-shaped building at the Infosys campus in the Electronic City area of Bangalore©Reuters

Making a point: inside the Infosys campus in the Electronic City of Bangalore

Occupying a prime corner location on the Avenue des Champs-Elysées, Louis Vuitton’s Paris flagship store is pink and elegant, its terraced upper floors enhancing an aesthetic effect that says wealth, luxury and opulence to anyone passing by.

On fashionable Rue du Faubourg Saint Honoré nearby, the headquarters of rival luxury brand Hermès is less striking than the Louis Vuitton building, yet it combines dignity and a sense of tradition with a certain Gallic quirkiness. A statue of a white horse and flag-bearing rider, harking back to the brand’s equestrian roots, seems about to jump from the parapet.

At this rarefied end of the retailing market, property has become part of a company’s advertising and image-building, says Carlo Barel di Sant’Albano, executive chairman of Cushman & Wakefield, the commercial property company: “On main streets round the world, these retailers want absolutely the right location, and they will say, ‘I only want that corner and, when it comes up, you get it for me.’”

Luxury goods companies are not alone in using buildings to reflect and reinforce their brands and business proposition. From Microsoft’s headquarters in Redmond on the US northwest coast to IBM in Armonk, New York state, and Infosys and Wipro in Bangalore, India, technology companies have built expansive headquarters “campuses”, often set in woodland or with landscaped lawns.

Not only do these university-style buildings imply their occupants are smart people, they are also emphasising the companies’ size and strength. That was particularly important in the late 1990s and early 2000s for the Indian information technology outsourcers as they progressively took on more challenging work from western corporate clients – visiting senior executives could be reassured by their partner’s physical presence.

Big law firms also want their offices to say something about themselves. In a curious reversal of old and new worlds, City of London “magic circle” firms like to assert their brand via spacious marble and glass foyers, while some Wall Street counterparts have a penchant for mahogany-panelled interiors.

Louis Vuitton store©Jimmy Cohrssen

Luxury on show: Louis Vuitton’s flagship store on the Champs-Élysées in Paris

So what happens when these brand-conscious companies decide they need to relocate their head office, maybe because their current building is too small or, as often happens, they want one new centre to house employees currently in several disparate facilities?

It is an opportunity to make a fresh statement about the group, but there are risks in moving from a city centre to the suburbs. Will the brand and the business suffer through a move to a cheaper but less-fancied district, in particular if it becomes harder to retain and attract talent?

Singapore-based Mark Lampard, Asia Pacific managing director of corporate solutions at Colliers International, another commercial property company, had exactly this conversation in February with a tenant at Two ifc, one of the priciest rental locations in Hong Kong’s Central district.

Related story

Ogilvy rediscovers harmony on South Bank

The communications group is reintegrating its London offices

“They were saying, ‘Do we as an organisation need to be in this iconic building with its easy access to the train and airport? If we decide to move to Kowloon [a much cheaper area] on the other side of Victoria Harbour, wouldn’t we have to create something really special to keep staff enthusiastic and feeling the organisation still wants them?’”

According to property consultants, the key to making the most of a big relocation and avoiding the pitfalls is for companies to do their homework. Google’s plans for a new UK headquarters costing as much as £650m are a case in point. The building, which is unlikely to be ready until at least 2017, will be close to King’s Cross rail terminus in central London, an area once notorious for its drug-taking and prostitutes. But the district has already undergone an enormous amount of regeneration, so there is little or no reputational risk for the search engine giant, says Guy Douetil, Emea corporate solutions managing director at Colliers International.

The Googleplex, Mountain View, California©Alamy

Into the valley: The Googleplex, Mountain View, California

He adds: “Google would not have made this decision if it had thought there was a risk of all its people walking out the door.” In any case, he says, the company already operates in a much more competitive jobs market than central London – its home base is in Silicon Valley, California – so it knows a thing or two about attracting and retaining talent.

Indeed, the Googleplex in Mountain View embodies the company’s unusual approach to stimulating its workers’ creativity and incentivising them not to move elsewhere in the Valley. The Android statues shaped like KitKat bars and other sweets, “nap pods”, sports facilities and recreational workshops are all aimed at amusing, diverting and relaxing them.

In much the same way, workers at the new King’s Cross site will be “living the brand, literally”, according to Peter Walshe, global BrandZ director at Millward Brown, the brand consultancy. BrandZ is a huge customer database that forms part of the WPP unit’s annual ranking of the world’s top 100 brands, published in the Financial Times. “Google’s staff are the innovators – they are incredibly important in driving the brand forward,” he says.

British Airways’ Waterside headquarters, London©View Pictures/UIG via Getty Images

High flyers: British Airways’ Waterside headquarters, London

Of course, few end-users would ever need to visit HQs such as the Googleplex, but new, bespoke buildings do create an ideal opportunity to target brand messages specifically at employees, via external or internal features. British Airways’ 16-year-old headquarters next door to London’s Heathrow airport is a good example. Its huge glazed internal atrium was built with six themed sections, each planted with trees to represent one of the continents the airline covers. This emphasises BA’s global remit while enhancing the working environment.

In central London, meanwhile, rents have been rising in the past two or three years, particularly in emerging locations such as King’s Cross and Southwark, says Dan Bayley, managing director for central London at BNP Paribas Real Estate, the property consultants. “Yet the organisations that have often been driving that are ones that have cheaper locations out of town.”

These companies – often fast-growing web businesses such as Amazon and Twitter – will be aiming to attract “global citizens” who want to live and work in central London, he says. The same “suburban to urban” trend is evident in San Francisco and New York, notes George Roberts, a partner in Cushman & Wakefield’s London markets team.

But smaller media and technologies companies want to make a statement about themselves too. “Shoreditch [just north of the City of London] is a very popular area for them,” says Bayley. “When they say they want to be up there, you know exactly what sort of building they will want – exposed brickwork, timber floors … so it’s partly the internal space that matters, but also the building’s exterior image.”

However, for all the growing worldwide interest over the past decade in combining disparate offices into one “statement” building with a better working environment, a couple of caveats need to be made.

A refurbished 15th-century palazzo

Fun palace: A refurbished 15th-century palazzo makes an inspiring setting for Gucci’s design team, but it is the Rome location that counts more than the building’s Renaissance frescoes. The Italian luxury goods maker moved its design office from its historic base in Florence to the Eternal City in 2009 because Rome is bigger, more international and has better transport links. Gucci was one of the first European companies to build a “statement” modern HQ in the suburbs – in the 1960s it moved its base from central Florence, where expansion is difficult, to the outskirts

First, apart from the few business sectors whose property costs are an operational pinprick compared with the money they can make, relocations almost always have to make sense in tangible financial terms as well as enhancing the brand and business intangibly.

The new base may have a higher rent than the average on all the old ones, says Bayley, but it could also be smaller. “New buildings are more efficient so you can fit more people in, but there are bound to be some roles that become redundant,” he adds. As a result, the relocation could be more or less cost-neutral.

Second, some companies see no reason to use their head offices for brand-building. Coca-Cola is fifth in the latest Millward Brown brands ranking, yet you could walk past its Atlanta HQ without giving it a second glance – remove the logos from the roofline and it could be a bank back office in New Jersey.

Japanese companies such as carmaker Nissan and supermarket groups such as Tesco in the UK take a similar approach, says Walshe. “They have very modest buildings in very modest areas,” he says. Their head offices may not be so pleasant to work in, but none are customer-facing. So why, these companies would argue, should they be part of brand-building that focuses on products and points of sale, backed up with marketing, advertising, the web and social media?

There is another point. “It’s about not overspending, so the company can’t be accused of corporate indulgence,” says Walshe. “It’s the opposite of the show-off vanity bit.”

That might give backers of the more grandiose relocation schemes pause for thought. Early last year one of the architects hired to design Google’s new UK HQ told the FT it would “articulate a conversation between the world within and the city beyond”.

Yet so far the project has seemed more like a dialogue of the deaf: Google reportedly threw out the original designs – which included a roof-top running track and garden – late last year and said it wanted to challenge itself, and presumably the architects, to “do something even better”.

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

SHARE THIS QUOTE