The take-up of office space by banks in the City of London has fallen 69% in the 12 months to October, according to Cushman & Wakefield
In its European Banking Briefing published today the property services company said that the reduced demand for space has led to a - 4.2% fall in rents over the last three months.
The banking sector is the largest occupier of office space in the UK’s main financial district, and is currently suffering badly from the world crisis.
In the rest of Europe banking demand has fared best in the Czech Republic with the office space market and banks’ demand for lease being stable; in fact the demand has grown 230% compared with last year. The total take-up in the Czech Republic this year will reach 2.6m sq ft with financial institutions constituting 30% of the total.
‘To date, the Czech market has not encountered a drop in demand on the part of the banks, especially thanks to two large transactions in the earlier half of the year.
'While we have recorded a few relocation or expansion requirements from the financial sector to be put on hold, other transactions continue without restrictions,’ Radka Novak, Cushman’s head of Prague office agency.
It said the reduction in office take-up in the banking sector is visible throughout Europe with cities like London, Brussels, Moscow and Madrid showing a clear decrease or a very slight increase of rents for the reviewed period.
‘Rental growth recorded in the Czech Republic in the first three quarters stopped in November and we currently do not see the rents falling,’ said Novak.
The major banking centres of Paris and Frankfurt have also demonstrated resilience to the crisis.
In Paris take-up of office space by banks actually increased by 110% in the year to October said Cushman although rents in the Paris central business district market fell -4.4% as demand was concentrated in the city’s cheaper peripheral locations where banks have relocated back office functions to reduce costs.
Budapest and Prague also saw significant increase in activity and ‘both are likely to benefit in the future from banks in Western Europe relocating back office functions to these lower cost locations’ said Cushman.
Cushman said it expects a number of major European banks to raise capital by selling and leasing back significant portfolios of real estate across all European markets.
Spanish banks BBVA and Banco Sabadell and Belgian bank Fortis are all currently in the process of selling major property portfolios.
Merrill Lynch estimates that European banks require an additional €73bn (£49bn) to shore up their capital. Cushman figures also show that there is currently €63bn (£43bn) of the banks’ own property assets on the balance sheets which could be sold.
Matthew Stone, head of Cushman & Wakefield’s EMEA occupier strategy team, said: ‘Most European banks need to raise cash but the traditional routes of equity or debt are now significantly more expensive. The sale and leaseback of property assets has become more common (over £2.5bn in the UK alone last year) and there is huge potential to realize value from these.’