European banks' office take-up down by 80% in first three months of 2009

The global economic crisis has pushed banks' take-up of office space in the first quarter of 2009 down by 80% against the long term quarterly average with the London, Moscow and Warsaw markets most affected.

In its new European Banking Briefing, Cushman & Wakefield also says it expects many banks to increase their real estate sale and leaseback programmes to raise capital over the next 12 months, particularly those which have had significant injections of government capital. Banks including Unicredit, HSBC and BBVA have all recently committed to major European real estate sale and leaseback programmes and C&W expects more to follow in 2009.

As rental values and capital values continue to decline, C&W also expects banks to make savings to their operational costs by renegotiating and re-gearing their leases. Many landlords are increasingly willing to renegotiate on favourable terms to secure tenants rather than risk empty properties.

Further consolidation is also expected within the sector in 2009 which will ultimately lead to a rationalisation of real estate holdings. Despite the merger activity that has already taken place, however, there has been relatively little tenant led space from banks being openly marketed in the main European markets. This is because most banks are already using space efficiently and because recent mergers have yet to fully agree their real estate requirements. As these become known, however, the amount of sub-leased space is likely to increase significantly in 2009. The market with the most tenant led space currently is London’s Docklands where 42% of the total space available to let is from banks. This contrasts with Frankfurt, for example, where only 1% of supply is tenant led space from banks.

Annual take up of office space by banks increased in 2008, primarily due to JP Morgan's 177,000 m² purchase of a site in Docklands, but finally ground to a halt in the first quarter of 2009 with only 43,630 m² let compared to 407,305 m² in the previous quarter. The biggest fall was in London where take up between the quarters fell from 45,057 m² to 2,599 m² (a fall of 94%; this strips out the JP Morgan deal.) Take up in Moscow fell from 66,442 m² to 1,600 m² (a fall of 97%) and in Warsaw it fell from 11,670 m² to 1,526 m² (a fall of 87%). No bank take up at all was recorded in Q1 in major markets including Brussels, Budapest, Milan, Amsterdam, Barcelona, Glasgow and Edinburgh. Paris, Frankfurt and Madrid, however, all recorded increases in bank take up.

Guy Douetil, head of C&W's EMEA banking group, said: 'The banking crisis has led to merger, acquisition and effective nationalisation of major banks across Europe. We are in uncharted waters and until we know the full extent of banking job losses, and therefore the amount of surplus office space that might be released, it is difficult to predict accurately how Europe’s main financial centres will be affected. Real estate, however, is a major cost centre for all banks and it is those that are prepared to manage their portfolios efficiently that will be best placed to ride out the current crisis.'