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Friday, 28 September 2012

Affordable Bank Space

As the stock market remains unsteady London banks are beginning to search for more affordable banking space. Property Consultants Cushman and Wakefield reported banks are being forced to cut property costs.

As 54 percent of financial companies are seeking to sub-let available space that is not being utilized, almost 107 other banks are cutting property space to save cost. Back in September 2008 Japanese bank Nomura entered a deal with European operations of Lehman Brothers forcing them to seek larger premises for their business is currently seeking tenants looking for prestigious office space in their property located near the London Stock Exchange.

The London Canary Wharf District has been home to the largest number of bankers in Europe are facing property occupancy troubles and have been forced to create flat rates of 55 pounds per square foot. According to CBRE for more than 18 months these rates have remained the same. Bank of America located in the Canary Wharf district is considering cutting property cost by removing back-office staff to cut the rent currently paid. Although no decision have been made, such cuts and move will result in loss of jobs causing more than 30,000 people to lose their employment. This plan is said to save 3 billion pounds by the end of 2014.

Citigroup is not only searching to relocate but they are recruiting members in Northern Island and Belfast. Such move will employ thousands of people and will save funds for Citigroup by cutting their rent cost to a third of what they pay for their current location.

Deutsche Bank and CommerzBank in Frankfurt do not have flexibility as they own their property. Vacancy rates in Frankfurt have gone down by two percent according to BNP Real Estate. This may be because of fewer traders and investment bankers.

Unlike other banks who are trying to cut cost, Credit Suisse is searching to increase funds up to 500 million Swiss francs by selling property. What happens to the people working in the locations? Simple they will be moving to out-of-town complexes such as the Uetlihol building near Zurich already occupied by 8,000 employees.

Through Canary Wharf investors of Qatari, banks received 330 million pounds from sales and leasebacks. However, although this money is available to be utilized landlords are seeking office space that provides better flexibility and architectural deisgn that can increase number of employees working out of the location. Such design will have the availability to increase number of employees per square foot and workstations where multiple user can share a desk at different times. Such smart designing will save on cost by avoiding having to build dedicated workstations.

Unlike other mainland European banks, London based banks are bind to their leases for 25 years. Nat West and Midland Bank though they would be around forever and build skyscraper; however, currently Nat West is part of RBS and Midland Bank is part of HSBC leaving their skyscraper and emblazoned name vacant and ready for use by other members of the financial world. Currently Real Estate do not search for deals past 10 to 15 years for banks providing the flexibility which other banks do not have as a result of contract bindings.

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