Technology, Administrative Streamlining Compel Life, P&C Insurers to Consolidate Digs
After decades of operating claims and administrative operations in numerous local and regional offices across the nation, State Farm Insurance, the venerable mutual insurance and financial services firm founded in 1922, is embracing technology - and with it, consolidation.
"Over the past 10 years, advances in technology have brought profound changes to both our business and our customer expectations as access to broadband and a growing array of mobile devices have become commonplace. Today, technology is playing a far more significant role in how we work together and deliver on our mission," State Farm Chairman and CEO Edward B. Rust Jr. said in a chairman's letter last month.
Those trends will now bring changes to State Farm's real estate footprint to "more efficiently and effectively organize our operations and facilities." While State Farm agents "remain our anchor in thousands of communities across the country," the company will consolidate customer service operations into three multi-functional hubs in the Phoenix, Dallas, and Atlanta metro areas. Operations centers that house claims, underwriting and support functions will complement the hubs.
On an ongoing basis, State Farm will "continue to evaluate the best use of all our locations to improve efficiencies and better meet customer expectations across geographic boundaries, and with greater flexibility," Rust said in the letter.
Other insurers are taking similar steps across the country, moving to fast-growing metros in Sunbelt states like Arizona, Texas, Georgia and the Carolinas. Still others are moving operations out of expensive high-end CBDs into clusters of financial services firms in areas such as suburban Indianapolis and Stamford, CT.
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Washington, D.C.-based auto insurer Geico said it will invest millions to lease, renovate and build out 109,000 square feet at 101 W. 103rd St. in Carmel, IN, where it will locate a customer service center and up to 1,200 new jobs by 2016. The center, a base for agents, training and supervisory teams, management and support staff, is expected to be operational by late April, according to Indiana Gov. Mike Pence and Geico Chairman Tony Nicely in a joint announcement Tuesday.
Baldwin & Lyons, another of the state's largest insurers, plans to relocate its headquarters from downtown Indianapolis to a building it has bought in Carmel. The company will vacate 81,000 square feet in the Landmark Center when its lease expires in August. Baldwin & Lyons, which now employs 350 people in Indiana and intends to create another 133 jobs by 2018 under a conditional tax credits agreement with the Indiana Economic Development Corp.
Meanwhile, The Navigators Group, an international specialty insurance holding company, will move its headquarters and other operations from Westchester County, NY, to Stamford, CN, a state with a large concentration of insurance firms, according to State Senator Carlo Leone, D-Stamford.
Fleeing Higher Rent Markets
"Each of these big office deals involves moves into, or staying within, markets with costs of operations that are below those of expensive markets like New York, Boston, San Francisco and L.A.," said CoStar Director of Research, Office Walter Page. "These metros offer affordable housing, reasonable air transportation and access to the type of employees that firms like insurers want to have."
Those relatively expensive markets include Chicago's West Loop, where a unit of insurance giant American International Group Inc. (AIG) plans to cut its Chicago
office space by nearly two-thirds when it vacates 200,000 square feet at 300 S. Riverside and moves to another office tower in mid-2014. National Union Fire Insurance Co. of Pittsburgh signed a 10-year lease for 75,000 square feet at Citigroup Center, 500 W. Madison St., according to reports.
Meanwhile, the economic engines continue to run hot in Houston, which led the nation in office demand growth last year with 5.2 million square feet of positive net absorption; Phoenix with 3.3 million square feet and Atlanta at 2.8 million square feet of absorption, according to CoStar information.
Phoenix and other high-growth metros like Las Vegas suffered catastrophic housing declines and skyrocketing unemployment during the Great Recession, while the Texas cities barely experienced a downturn. These lower-cost metros are the future base of thousands of additional insurance industry employees.
Consider these recent relocations and expansions in Arizona, Texas, Georgia and North Carolina:
USAA, which provides insurance and financial services for the U.S. military and their families,
is acquiring and planning additional office space in the San Antonio and Phoenix markets as part of an aggressive national expansion that will create as many as 3,500 jobs across the nation over the next three years.
State Farm took occupancy of more than 400,000 square feet in Atlanta's up-and-coming Central Perimeter submarket in one of the metro's biggest leases of 2012. State Farm also took a combined 250,000 square feet in the fourth quarter in Tempe, AZ, and the nearby 44th Street Corridor and is hiring 500 workers for new call centers in Phoenix and Tempe.
Bloomington, IL-based State Farm also continues to expand its presence in the Dallas-Fort Worth region, signing office leases totaling 700,000 square feet in late 2012, including a 4-star
office building vacated by Nortel in Richardson, TX. The company also plans to open a 1 million-square-foot regional headquarters in 2014.
QBE Insurance recently moved 600 workers into expanded call center space in Chandler, AZ, that could eventually support 1,000 employees. Allstate, Liberty Mutual, and CIGNA all signed new leases north of 60,000 square feet late last year in the Phoenix metro area.
Aetna Insurance signed a long-term lease in third-quarter 2012 and is scheduled to move into a new 140,000-square-foot, two-story building on 12 acres at 4500 E. Cotton Center Blvd. in Phoenix at Liberty Property Trust's Liberty Cotton Center Business Park in June.
In the Charlotte and Raleigh-Durham, NC, metro areas, the nation's largest life insurance company, Metlife Inc., will
bring up to 2,600 jobs, many of them relocating from offices in Boston and Lowell, MA; New Jersey; Bloomfield, CT; Johnstown, PA; Warwick, RI; and Aliso Viejo and Irvine, CA. The cost-cutting measures implemented by MetLife CEO Steven Kandarian will relocate the administrators for its U.S. retail business to Charlotte, and technology and operations workers in Cary, NC.
In Charlotte, among the fastest job growth metros in the country, the financial industry has been a source of encouragement, with visible net job growth across most industries within the sector -- particularly by insurance and credit intermediation companies, according to Property and Portfolio Research (PPR), CoStar's analytics and forecasting firm.