MNCs in China focus on resilience; CRE strategies show "future-proofing" trend

Shanghai, July 21, 2022 – JLL released the latest report of MNC CRE Strategies survey under the pandemic. This survey aims to explore MNCs’ needs and expectations regarding office leasing, workplace strategy, and facility management in China. Respondents include some 150 MNCs from a range of sectors throughout China. The research used K-Means cluster analysis to quantify and classify surveyed companies across five key dimensions of real estate decision-making determined by JLL. Our analysis identified a group of “future-proofing” MNCs whose leading CRE strategies stand out from the rest. 

Most firms’ CRE plans have not been affected by the pandemic 

Of MNCs surveyed, 77% stated that their plans were not affected by the recent pandemic; 19% of the respondents would reevaluate their plans; while only 4% have canceled their expansion or upgrade plans. 

In terms of industries, the life sciences sector was the least affected. No companies in this sector canceled their plans, and 94% of firms indicated that their leasing progress were unaffected, or planned to resume after business returns to normal. Professional services and financial services companies remained resilient. Among these firms, 84% of the professional services firms keep or temporarily suspend their CRE plans and 8% will reevaluate their strategies. In terms of financial service industry, 67% of the respondents’ CRE plans were unaffected. The rest 33% indicated that they would reevaluate their plans, but no cancellations. 

MNCs have grown more accepting of hybrid accommodations – with a larger share of employees working remotely, since China’s most recent wave of pandemic. “Although hybrid approaches grow more common, most firms recognize that office spaces still have irreplaceable value,” said Joseph Wang, Senior Director for JLL Shanghai Office Leasing Advisory. Many MNCs believe that physical presence in offices and in-person interactions are key to increasing productivity. Working in offices also can cultivate important functions like cross-department collaboration and innovation, impromptu conversations, and relationship building.

Notably, approximately 67% of the respondents with over 5,000 sqm of office space will consider split office operation. In addition to cost saving and business development, BCP (Business Continuity Planning) is one of the main drivers for all surveyed firms to pursue split office arrangements. In terms of splitting options, setting up offices in emerging submarkets is the most popular. Approximately half of the companies currently located in mature areas that are considering splitting offices expressed a preference for emerging submarkets as their second locations. 

Key takeaways from future-proofing companies 

In this survey, JLL analyzes MNCs across five dimensions including office site selection strategy, workplace planning, facility management, digitalization strategy, and human experience, and tries to understand how they are developing and optimizing CRE strategies to cope with the pandemic while also serving their long-term China growth strategies.

Many companies are now developing comprehensive CRE site selection strategies with increasing attention to strategic factors such as ESG (Environmental, Social, and Corporate Governance), company branding, talent retention, and BCP. This is in addition to more traditional factors compared to three years ago, such as cost and accessibility. “About 26% of the surveyed companies show future-proofing characteristics,” said Daniel Yao, Head of Research for JLL China, “these companies put strong emphasis on strategic factors in their wholistic CRE strategy, aiming to leverage CRE decisions to achieve their companies’ long-term objectives.”

Workplace planning shows resilience through multi-functional designs with BCP consideration. Both future-proofing companies and other surveyed firms suggested increasing emergency stocks and storage space in workplaces out of BCP considerations. At the same time, improvements to entertainment and rest areas demonstrate future-proofing companies’ focus on enhancing employee experience. 

Ronnie Yin, Head of Sales for JLL China Work Dynamics pointed out that despite the impact of the pandemic, 51% of the future-proofing companies are committed to increasing investment in facility management. In terms of industries, pharmaceutical & life science and financial services are more willing to increase investment, and in terms of office size, firms with offices larger than 5,000 sqm are more willing to increase investment. 

Digitalization has become an effective pathway to realize “future of work”. Digitalization can enhance the office experience in areas such as intelligence, flexibility, and health. About 97% of future-proofing companies will continue to focus on digital strategies. At the same time, future-proofing companies demonstrate significantly higher of concern for employees’ well-being. Both during and after the pandemic control period, these companies have adopted diverse approaches to improve employees’ physical and mental health, and to keep employees motivated and engaged.

Respondent background: The survey was conducted from June 1 to June 18, 2022, and approximately 150 MNCs from different industries completed the survey. These MNCs mainly come from industries such as financial services, professional services, retail, TMT, and life science. 34% of the surveyed companies are headquartered in the U.S. and 25% are headquartered in Europe. 59% of the surveyed companies have more than 2,000 square meters of office space; more than 1/3 of the surveyed companies have more than 1,000 employees in China.

Click to download the report and learn more about the survey results.