Banking demand to remain subdued – CBRE
CBRE has issued new research looking at the deep structural change taking place in the banking and finance sector and what it means for the Central London offices market.
The firm says that while London remains resilient as an international financial centre – foreign banks have been the main acquirers of space in the past three years – the banking sector does face unprecedented challenges in the next few years that could hinder its growth potential. These include tighter regulation, which has led many banks to undertake restructuring programmes that have reduced the number of locations from which they operate. Some banks are, however, diversifying in response to these challenges. Banks are also expected to face greater competition from outside the sector in future.
The challenges faced by the banking sector have naturally led many banks to put off significant real estate decisions, and this trend is set to persist, CBRE says. Some large financial institutions have relocated some of their functions from the capital to regional UK locations to cut costs, and the firm also expects this to continue.
“Demand is likely to stem from a combination of structural demand and M&A activity,” CBRE says. M&A activity in the sector is expected to increase in the next three years. Not all potential lease events will translate into new requirements, as occupiers will re-gear and acquire spill-over space, it notes. So demand for office space from the banking and finance sector overall in the short term is expected to remain subdued.
“A gradual recovery in the UK and mainland European economies will provide a welcome boost to the sector, but growth is not expected to be scintillating and demand for office space will not reach the heights seen in previous recoveries,” CBRE adds.
