Why Fortune 500 companies are stepping up MEA activity
Major corporations are continuing to expand their operations in the Middle East and Africa (MEA) as they seek to look beyond ‘traditional’ markets into ones that offer new opportunities for development and growth.
By the end of 2016, 196 of the Fortune 500 companies had offices in the region, an increase of 17 percent (from 167) from 2015. Firms based in the USA, Canada, China, Switzerland and The Netherlands all increased their presence in MEA over the last 12 months.
Data from Infomineo, a business research organisation specialising in the emerging markets, informs on which countries and cities are most desirable, and which industries are fuelling the rising interest.
Dubai is the most desirable destination: 138 Fortune 500 companies now have offices there, followed by Johannesburg with 58, Casablanca with 37, and Nairobi, 28.
The popularity of certain cities and countries is dependent on a number of factors, including local market potential, maturity of the industry, existing competitors, and company culture. Other factors include political stability, laws and regulations, business language used, quality of the employment market, and local resources and infrastructures.
Casablanca has seen a surge in popularity, with 20 companies expanding to the city in 2016 alone, marking a 150 percent increase. This popularity has been fuelled by the automotive and technology industries, following expansion from Ford, Continental, Volvo, Lenovo, Arrow Electronics and Ingram Micro.
Hamza Laraichi, Managing Partner at Infomineo, says there are multiple reasons for Casablanca’s rise in popularity: “Morocco’s economic stability in the face of global economic slowdown has provided businesses confidence. In 2010, the Moroccan Government launched ‘Casablanca Finance City’, a project aimed at attracting foreign companies with fiscal incentives, including five years’ tax exemption for revenues derived from exports. This project has provided valuable support to businesses looking to expand.”
“Significant investments in infrastructure have also made Morocco more desirable, including ports, industrial parks, nearshoring venues and particularly roads with 1,800km built in 2015 alone, significantly improving Morocco’s logistics. Finally, increased Foreign Direct Investments have increased Morocco’s overall wealth, and its good relationship with Africa makes it an even more attractive base for global multinationals.”
The finance industry has the highest number of companies within the MEA with 34 companies, a 36 percent increase from 2015. Recent moves have come from Sumitomo, Mitsui Financial Group, Credit Suisse Group, AIG and Intesa Sanpaolo.
The energy sector’s presence in the MEA is growing at the fastest rate of 61 percent, with 29 of the Fortune 500 companies now focused in the industry, an increase from 18 in 2015.
Francois Marchal, General Manager at Ghana’s Private Bank, Société Général and a close associate of Infomineo, says that due to an emerging middle class, there is a growing interest in the African market by financial players: “Provided that a portfolio is representing the performing part of an economy, financial players will naturally outperform the GDP of those [African] countries. This is a major trend because those countries are growing.”
Marchal offers his advice for companies considering expansion: “The key risk for Fortune 500 companies is going there without a long-term plan. Growth in Africa is not consistent country by country. When settling in Africa, it is important to diversify your presence because you will always have one country that is out-performing another. Diversification in Africa and regional coverage gives you a balanced and secured approach to settling there.”
Infomineo client have included Société Générale, Novartis, Novo Nordisk, Boehringer Ingelheim, L’Oréal, and Savola.
UK office space slashed as hybrid working looks set to stay
With hybrid predicted to be the working model of the future, and businesses both large and small announcing that WFH will continue for employees into the future, the traditional office space is being re-thought.
Businesses are both questioning how much space they need for a hybrid working future, especially if it means they can potentially save money, and what form that space should take.
UK firms slashing office space
Back as early as February, HSBC – whose real estate footprint currently stretches to around 112 football pitches worldwide – said it would be cutting its post-COVID office space by half globally and by 40% in London over the next few years, as it looks to implementation of a hybrid working model in light of the pandemic.
Lloyds Bank followed suit. Following an internal survey where 77% of employees said they wanted to continue to work for 3+ days a week post-pandemic, the bank announced it was also moving to a hybrid model, and so looking to cut its office space by 20% over the next two years.
In fact, the latest research from consulting firm PwC reveals that a third of organisations surveyed (258 of the UK’s largest companies) believe they will reduce their office footprint by more than 30%.
The findings of PwC’s Occupier Survey indicate there is likely to be a sizeable fall in occupied office space with half of executives surveyed saying that despite taking into account mass vaccinations, employees will continue to work virtually 2-3 days a week.
And companies continue to announce the hybrid working model for their employees. Accountancy firm EY has just announced that its 17,000 employees are moving to a hybrid way of working, WFH for at least two days a week. This follows PwC which in March said workers could stay at home for half the time and KPMG which this month said it would expect employees to only work two days in the office every week.
More collaborative work spaces
However, what’s also clear from PwC’s research is that the role of the office is not going to disappear completely, but instead adapt to a new way of working, with half of all organisations with more than 100 employees saying they have a real estate and workplace strategy that considers the long-term impact of COVID-19.
“We may see an increased demand for flexible space as many businesses operating models may well need that option if holding dead space is to be avoided,” says Angus Johnson, UK Real Estate Leader at PwC UK.
According to the survey, more than three quarters of respondents said they are likely to reconfigure existing office with 43% of financial services firms stating that they are extremely likely to do so as a result of the pandemic.
“It’s also clear that the nature and purpose of office space is going to change. As occupiers seek new, different space to meet their accommodation needs, environmental aspects will be increasingly important. If the real estate sector is to truly succeed as a more dynamic, greener industry it’s imperative that creative thinking comes to the fore.”
And companies are already thinking creatively how they can utilise office space in a hybrid future. So while HSBC is cutting a significant amount of office space, it is not downsizing its prestigious Canary Wharf headquarters, and instead reimagining the space. In April, CEO Noel Quinn announced the firm was embracing an open plan floor, with no designated desks or private offices, and instead using hot-desks in line with the future hybrid working style. “My leadership team and I have moved to a fully open-plan floor of the building in east London with no designated desks,” he said on LinkedIn.
Lloyds also reported it was adapting its office space, so that rather than individual offices, it will have a more collaborative workspace. And just last month, KPMG announced it too was ditching desks and individual offices, and replacing them with meeting rooms and conference halls for a more collaborative workspace.