Investment banks cut their London office space
Three quarters of London’s banks have said they are planning to slash the amount of office space they use, according to a recent commercial property survey of the industry by CBRE, the world’s largest property fund managers.
The mass exodus of London’s banks coincides with sweeping regulatory financial changes taking place, highlighting the political and economic pressure being put on Britain’s financial institutions.
The results of the survey will be a concern to many commercial property landlords, particularly to those with assets in the London’s City borough, the heartland of banking industry.
Banks relocating to more cost-effective premises could reduce their real estate costs by 40%, with the average cost per square foot in the City of £55 sq ft being potentially reduced by almost a half.
Senior director of CBRE’s central London tenant advisory group, Frances Warner-Lacey said: “The pressure on the banks in recent years has undoubtedly had an impact on their real estate requirements and recovery in the sector is likely to be slow in an environment of tighter regulation.”
Under new regulations being ushered in over the next five years, Banks will have to increase the amount of capital they hold against loans, with the banking sector recently being rocked by the Libor scandal and faced by tough questions about executive pay throughout last year.
Despite the shrinking of the banking sector, others have grown, notably businesses within the technology and communication industries, which overtook the banking sector last year for the amount of take-up in London.
Major technology companies such as Skype and Amazon have taken up substantial leases close to the London City, with other TMT companies slowly migrating inward from fringe areas such as Shoreditch and Farringdon over the past 18 months.
CBRE’s survey concluded that take-up by TMT companies could reach 1.2m sq ft by 2014, offering some comforting news to commercial property landlords suffering from a decline of interest from other business sectors.