Localization and expansion trends of the HQ and their related units (from the interview of 19 groups)- IAU îdF

December 2007

During the last few years, there has been an accelerating trend of big firms to relocate their HQ within the Ile-de-France region. That went alongside with a split-up of functions that previously composed the corporate headquarter (business units’ HQ, corporate human resources or computer departments, and back office function). These functions, which are no longer located in the place called “the HQ”, tend to be regrouped out of the traditional economic core, at its immediate proximity or in more remote locations.
IAU île-de-France in co-operation with the LATTS Laboratory (Technologies, Territories and Societies) have analyzed these trends in a study issued in December 2007.
The study focuses on the observation of groups that have a significant impact on the regional economy through the number of people they employ within their HQ, and the office spaces they occupy.
Four economic sectors have been selected : finance-banking and insurance ; automotive, air and space, and electronics industries.
The analysis confirms that there is an expansion of the localization area of HQs and their related units. This extension is different from one sector to another. For the finance-banking and insurance sector, the expansion is relatively limited to the immediate proximity of the Paris Central Business District (CBD) ; for the industrial sectors it is much wider, with a particular focus on the South-Western edge of the Paris conurbation. This focus is particularly stressed for R&D related activities.
These relocations rarely concern the whole HQ, but target more specific functions that are considered as less strategic or less legitimate to stay in the economic core of the urban region.
The most prestigious functions, with less employees and higher wages tend to stay in, or very close to the CBD, in high valued real estate. The reasons for such relocations are manifold and lie in the combination of several factors. Large companies wish to rationalize their geographic localization in order to improve the synergies among their personnel. Therefore, they leave different buildings they previously occupied to concentrate their staff in bigger, more functional and efficient ones. The trend is boosted by the rise of mergers that rapidly change the activity perimeters of the companies. These office spaces are very difficult to find in the traditional CBD, and even if available, the companies are less willing to pay the price which can be very high compared to other locations in the region (like in La Défense for instance). As cost reduction driven policies are gaining power among companies, the search for running cost cutting has now reached the HQs.
Because real estate is now the second cost for big firms’ HQ and related units established in the region, the thinking about what should be a HQ, its optimal size and who should remain close to the CEO, has developed within large companies.
This explains the accelerating relocation process of HQs’ related units in large office buildings (more than 10 000 sqm. in one piece) out of the traditional HQ location zones.
This expansion of HQ and HQ-related units location zones represents an opportunity for local authorities to organize or develop new sites for these activities. The main challenge is to seize these occasions to tend to a more balanced spatial and economic development in the region. This could only be reached by policies planned-out and implemented at a regional level.

How does the Ile-de-France region perform regarding the presence of Fortune global 500 companies ?

A specific investigation confirms that the worlds largest groups concentrate their HQ in very few metropolises : Tokyo, Paris-Ile-de-France, New-York and London, host 1/3 of the world HQs of these Fortune 500 companies (FG500). The Ile-de-France Region, with 37 world corporate HQ (in 2005) ranks second behind Tokyo.
A closer investigation at the Paris Region shows that beside the world HQs, the region hosts 135 other corporate HQs representations belonging to the FG500. These other corporate HQ representations have a more limited sphere of activity, mainly restricted to France but for some of them concerning the whole Europe or the Europe MEditerranean Africa (EMEA) zone.