Call Center Site Closure Trends in the Midst of the COVID-19 Pandemic

The need for bricks-and-mortar call center facilities going forward is unknown as the impact of COVID-19 on the call center industry is still unfolding. It has been a lot easier for the call center industry to shift to work-from-home (WFH) agents because most call centers had already been doing it to some degree over the last decade. Cloud-based technology has already been widely accepted in the industry which allows for agent mobility to happen much quicker and easier. A lot of companies continue to ride out the storm by holding onto their facilities while others are closing sites or letting their leases expire. To help you develop a plan, Site Selection Group has identified the following market trends that may impact your decision on whether to close, downsize or add new capacity:

1. Most companies take a wait-and-see approach

Many companies just think it is premature to make a final judgment on closing a site and shifting more agents permanently home. Site Selection Group tracks site closures across the world and has noticed the number of announced closures is minimal given the impact of COVID-19. Most companies appear to have a lot of uncertainty about what to do so they are likely taking a wait- and-see approach before making decisions on closing their call center facilities that they have invested millions of dollars to set up.

2. Call center closures likely to spike as leases expire over next 12 months

There has been an increase in the amount of unofficial closures as call center leases are expiring in the next 12 months. Since the agents are working from home today, some companies are not planning to renew their lease but aren’t making official announcements. Site Selection Group has witnessed this with larger business process outsourcers who are shedding bricks-and-mortar capacity; however, the jobs are still there but just at home going forward so it doesn’t necessarily change the labor market. As a result, there will likely be a surge of vacated call center facilities emerging over the next 12 months as these leases expire.

3. Travel and hospitality industry hit the hardest

The travel industry was hit the hardest by COVID-19. The sector also took the fastest and most aggressive moves on layoffs and site closures. Hyatt, Lyft, Airbnb, Air Canada, Holiday Inn Club Vacations, Marriott and Westjet announced layoffs and site closures in May and June. The business process outsourcing sector also had some big layoffs; however, other industries remained relatively silent on their plans.

4. Landlords of call center buildings are nervous

Landlords who are leasing their buildings to call centers are nervous. Call center facilities are unique, typically large facilities so if you lose a tenant it can take years to lease it again, especially given the impact of COVID-19. In addition, many call centers are located in former retail stores so it will be even more challenging to convert them back to retail given the condition of the retail sector right now.

5. Some companies are downsizing and renegotiating leases

A lot of companies are shifting to a hub-and-spoke call center model so if you are needing to downsize your call center facility and shift more agents to home, then it is probably the optimal time to try and give back space to your landlord to help reduce your rent. Landlords would rather have part of their building leased than none of it. However, it is important to understand if the space is easily divisible and be sure to plan for additional collaboration space and training rooms for home agents to visit the site.

6. It’s a buyer’s market if you need a new call center facility

If you do have a need for additional call center facilities, then now is probably the best it has been since the Great Recession. Tenants are in the driver’s seat during negotiations with landlords. Site Selection Group currently has multiple clients taking additional sites and has seen the rental rates to be 20%+ less than pre-COVID-19 and more concessions such as free rent, tenant improvement allowance and furniture provided by landlords.     

Conclusions

The long-term implications of COVID-19 and work-from-home on the call center industry are unknown. Issues related to culture, security, training and business continuity are only a few of the hurdles that must be overcome before the need for call center facilities disappears.