The insurance sector in the UK will undergo large scale office consolidation and sell property portfolios as it copes with the fall out from the economic downturn and financial crisis according to Jones Lang LaSalle.

In its report, Insurance: Where Next? published today JLL said that recent financial crisis and government intervention at major insurance companies could likely trigger office consolidation and ‘once in a lifetime buying opportunities’ as troubled insurers are forced to sell assets.

The report identifies key trends that will shape the insurance sector over the medium term, including predictions that:

*growth in the insurance sector will be flat at best over the medium term; *Regulation will have a big impact on the sector although the form of the regulatory response to the financial crisis is yet to be fully determined; *Merger & acquisition activity is likely to increase and will provide a major source of property portfolio ‘churn’ over the short and medium term; *Insurer’s focus on cost will be intensified; and *There will not be a significant increase in outsourcing and offshoring as this has already ‘been firmly embraced by the insurance sector over the last 5 years’.

The insurance industry has a strong cultural and business attachment to the City of London but may move back office functions outside London.

Regional UK insurance office locations are likely to face a higher chance of consolidation with insurers seeking to reduce the number of properties.

It said that insurers who wish to consolidate City of London office space will find that market conditions over the next 18 months will present attractive opportunities as the market softens.

Angus Goswell, director of city agency at JLL, said: ‘The financial crisis and economic downturn has already had a large impact on the insurance sector and we expect more turbulence in the short term. With growth likely to be flat at best, industry consolidation and merger and acquisition activity is likely to be a major driver of portfolio churn.

‘However, those occupiers hoping to consolidate into large buildings in EC3 will find a lack of new grade A supply, particularly in the core, and with no new development starts in the short term, we expect the lack of supply in EC3 to become even more pronounced as we come out of the downturn.’

Mark Lacey, JLL’s director of tenant representation, said: ‘Insurance portfolios outside central London will also undergo substantial change over the medium term. Intensified cost pressure will mean property consolidation is likely to accelerate with groups seeking to reduce the size and number of properties in the portfolio.’