Seventy two per cent of banks with a presence in Central London plan to streamline their real estate portfolios over the next two years to reflect the global economic landscape, and are looking at implementing more cost effective and efficient operational measures, according to new research from global property advisor CBRE. Banks looking to consolidate globally are reviewing their priority locations, and London remains a likely growth area.
Respondents from CBRE’s latest occupier survey, which included 19 of London’s largest banks, also found that 34% expected to see consolidation of real estate assets in response to an expected rise in M&A activity in the sector. Fifty six per cent said they expected to consolidate their current office space occupied, with just 6% stating that they planned to maintain their current portfolio.
According to the report, other measures which may affect the volume of London office space taken by the sector in the next two years include a trend for large financial institutions to relocate some functions to other, more cost effective, UK markets which could reduce salary bills by as much as 40%.
The survey confirmed that maintaining a core presence in London was central to future plans, due to its unrivalled position as a global financial centre, wide talent pool, cultural benefits and central timezone between the New York and Asian centres.
Whilst banking occupiers have been subdued in recent years, owing to the international financial crisis, Eurozone debt problems and regulatory changes, the UK is still the largest centre for cross-border lending, and remains the single largest market for foreign exchange trading, accounting for 38% of the market globally.
Frances Warner-Lacey, Senior Director, Central London Tenant Advisory Group, CBRE said:
“London’s cultural advantages, its preferable time zone and reputation as a world class city means that the best talent and biggest institutions still want to be based here and we don’t expect to see a shift in sentiment. 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. That said, there are signs of growth in M&A activity, financial technology and asset management and this represents some positive news for London.”
CBRE predicts that the reduction in headcount, currently being experienced in the core banking functions, is being somewhat offset by growth in other related areas of business such as financial technology. The research also suggests that although fewer London office locations may be required by banking occupiers in the future, the result of M&A activity in the sector and London’s undisputed role as a global financial centre will mean that financial services companies will maintain their position as one London’s biggest employers, with an estimated 30,000 jobs set to be created in London over the next five years.
Alex Andel, Head of Client Solutions, CBRE, said:
“For our corporate clients, three factors usually determine real estate strategy – talent, location and cost – and for banks the latter is just about always the priority, especially for non-client facing property. It has been a tumultuous few years for the sector, and as a result banks are doing all they can to create efficient portfolios, not just in London but across all global markets. The banking sector is relatively advanced in terms of portfolio rationalisation initiatives, so most of the leading companies in the sector will be actively looking at how they can make changes to their real estate, including rethinking the way staff members use their workplace, without compromising their commercial objectives.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com