EG LONDON OCCUPIERS
SHOULD I STAY OR SHOULD I GO? LEASE DRIVEN ANALYSIS 2013-2016
Undecided
LONDON STAYS KING OF THE FINANCIAL SERVICES CASTLE
London remains top of the rankings in the latest Global Financial Centres Index report, published at the end of last month by London-based commercial think-tank z/yen. In fact, the top three rankings are unchanged from the previous report, which has been published at six-monthly intervals since 2007. Based on responses from around
2,000 senior financial services sector professionals worldwide, and covering 77 global centres, the index has become a useful barometer for the industry. But do the latest findings
acknowledge the UK public backlash against bankers and the fear within the profession of over-zealous regulation in London? The report’s author, Mark Yeandle,
responds: “The index takes into account people’s perceptions and those do sometimes lag behind reality. However, if you accept that the financial services market is global, then you need to be based somewhere in the European time zone.”
London, he suggests, is the clear-
cut option, as theoretically competing European centres such as Frankfurt and Paris lag much further down the rankings (10th and 26th, respectively).
TOP 20 GLOBAL FINANCIAL CENTRES – SEPTEMBER 2012 - MARCH 2013
Centre London
New York Hong Kong Singapore Zurich Tokyo
Geneva Boston Seoul
Frankfurt Chicago Toronto
San Francisco
Rank 1
2 3 4 5 6 7 8 9
10 11 12 13
Washington D.C. 14 Vancouver Montreal Calgary
Luxembourg Sydney Vienna
Source: GCFI 13 76
www.estatesgazette.com
15 16 17 18 19 20
Rating Ranking change
807 - 787 - 761 - 759 - 723 - 718 +1 712 +2 711 +3 710 -3 703 +3 698 -3 696 -2 695 -1 692 - 690 +1 689 +1 688 +6 687 +6 686 -4 685 +16
Stewart Smith, head of CBRE’s London tenant advisory team, is far from certain. “This isn’t a market flutter, we are in a period of structural change,” he says. “The issue is not going to go away and regulation isn’t going to get lighter.” Smith suggests that future property
decisions made by banks based in London will be determined by three key factors: the total number of employees, where those employees are located, and external threats to the business (such as bonus caps and regulations). With job cuts taking place globally
across the banking sector, working out to what extent the axe will fall in London is tricky. “While the last three years have been very volatile, we see employment being much more stable in 2013,” says Hakan Enver, operations director of City recruitment specialist Morgan McKinley. “We’re seeing a net increase in jobs at the moment, particularly in risk compliance auditing, and banks are also investing heavily in credit analysts.” Overall, though, London does not appear
to be immune from further reductions. Forecasts from the Centre for Economics and Business Research show employment in financial services in London falling this
50000 100000 150000 200000 250000 300000 350000 400000
0 2007 2008 2009 2010 BIG BUCKS TO SMALL CHANGE
Once upon a time, financial services companies, mainly banks, accounted for a large proportion of annual office take-up in London. No longer. Over the past six years the sector has averaged one-fifth of the annual total, and in the past two years it has been closer to just 13% (see graph, right). Between 2007 and 2012, take-up
by financial service occupiers totalled around 2m sq ft pa. Since 2009, the trend has been for
progressively less space, with the exception of 2010, when several large deals completed, including 1m sq ft for JP Morgan at 25 Bank Street, Canary Wharf, and a 700,000 sq ft prelet for UBS at 5 Broadgate, EC2.
13 April 2013
Sadly, no such deals are expected in the next few years and prospects for future take-up are slim by historic standards. Even if the expected amount of take-up due to lease events occurs (see main text), this averages out at a paltry 175,000 sq ft pa between 2013 and 2016. There was little sign of rental
movement in 2012, with the City continuing to offer the lowest deals for those prepared to move. Small (2,000 sq ft) suites of secondhand grade A space changed hands for £27 per sq ft, while larger amounts (above 10,000 sq ft) went for £34 per sq ft. The highest rents achieved in 2012, at or above £100 per sq ft, were for small suites in the West End.
2011 2012 2013 2014 2015 2016 2017 14% Stay
Move 35%
Source: CBRE
year and next (see graph, below) to reach a nadir not seen since 1993. “The outlook remains very weak,” says
CEBR economist Rob Harbron. “While there is likely to be some growth on the compliance side, M&A activity is still down. Many companies have a lot of spare capacity so it will be a while before they start recruiting.” In the meantime, banking
commentators reckon that a wedge of jobs located in London will be shifted to other parts of the UK. Examples of what the banks call “near-shoring” include Deutsche Bank moving more staff to Birmingham and JP Morgan bolstering its base in Bournemouth.
FINANCIAL SERVICES JOBS IN LONDON 2007-2017 51%
Source: CEBR
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