In February, Hogan Lovells opened a global business services center in Louisville, Kentucky, one of the latest firms to move administrative jobs to lower-cost cities. The firm is paying roughly $20 a square foot for 31,000 square feet of space, less than a third of the rate for prime office space in New York and Washington, D.C., where the firm has its two biggest U.S. offices. As of September, 50 people were working there; the firm aims to employ 250.
Mark Klender, a principal at Deloitte Consulting LLC, who advised Hogan Lovells on this move, says that a firm can slash its real estate costs by more than half with a back office or shared service center, as they’re also called, and that’s not even the biggest efficiency. “There’s bigger savings on the labor front,” he says. “Ten percent of the savings come from real estate, and 90 percent come from labor.”
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