New and increasingly sophisticated office users are transforming Phoenix’s financial services landscape from a once predominantly call center market into a diverse operational hub, according to the recently released JLL Financial Services Operations Center Report.
Compared to even a few years ago, the Valley is now home to a wave of financial services companies – to include banking entities and insurance companies with banking departments – who are choosing to relocate or expand in secondary cities like Phoenix over established headquarters markets. According to JLL, two-thirds of all financial services real estate is now located in such markets, well outside of the places most commonly associated with banking, such as New York and San Francisco.
In Phoenix, financial services companies in the past 24 months have completed 88 deals totaling more than 1.7 million square feet of office space. That equates to 30 percent of all office absorption in the market in that timeframe.
Among these notable transactions are:
• American Express, with a two-building, 369,996-square-foot expansion at its Desert Ridge campus in North Phoenix.
• Freedom Financial, leasing 300,000 square feet in two buildings at the new Rio2100 in Tempe.
• Vanguard, expanding by 127,787 square feet at McDowell Mountain Business Park.
• Allstate, completing two subleases totaling 100,622 square feet at Allred Park Place in Chandler.
• Northern Trust, expanding by 75,000 square feet at Discovery Business Campus in Tempe.
• Liberty Mutual, leasing 102,121 square feet at Mach One within Chandler Airport Center.
“Many financial services companies are looking for ways to reduce budgets and retool their operational efficiencies, and centralizing operations to regional hubs has been a successful way to do that,” said JLL Managing Director John Pierson. “Phoenix is a beneficiary of that centralization, but we’ve also worked hard to earn our position as a top secondary market option.”
Pierson cites Phoenix’s modern inventory of office space and the large pool of quality, market-ready graduates emerging from its state universities and community colleges as major attractors.
“Financial services companies need employees of all types to fill jobs from traditional contact and support roles to high-tech IT functions,” said Pierson. “Many are also looking for large campuses that can consolidate their operations into one location, with amenities that will attract and retain top talent. Freedom Financial and American Express are great examples of spaces that can accommodate dense labor forces with great amenities.”
According to JLL, the rise of financial services companies has increased the number of open financial services jobs in the Valley by 6.1 percent in the last 24 months, with many of these jobs representing specialized fields. This tracks with national trends, in which 25 percent of all open U.S. banking jobs are IT-related and another 43 percent are in processing and operations – far exceeding the number of jobs open for investment managers or traders.
Nationally, JLL anticipates an additional 15 million square feet of real estate demand for operations centers over the next five years, in a banking industry that currently has 96 million square feet of active operations center space.