Investment and banking firms everywhere are looking to slash their office space, with Barclays looking to unload its headquarters in London, Credit Suisse ditching nine floors of office space, and Morgan Stanley reevaluating its entire London footprint.
With millions of jobs cuts and a recession on the horizon, landlords in London and Canary Wharf could face massive tenant retreat.
“Larger banks are clearly a higher risk for landlords,” said Rogier Quirijns, head of European real estate at Cohen & Steers Inc. “For London, there are the threats of recession and a possible no-deal Brexit to deal with, and I expect Covid-19 will most likely accelerate those risks.”
Over the past nine years, the London footprint of banks has already dropped by around six million square feet according to CBRE, and the pandemic is accelerating this drop.
Along with massive job cuts, the future of the office in general has caused business leaders to question their necessity. Many organizations have been comfortably operating through remote working policies, and the cost effectiveness of this shift may open up new opportunities during this economic downturn.
According to Mat Oakley, head of commercial research at Savills, many banks have a five-year plan of cutting their office footprint by 20% of pre-pandemic levels.
“So this is not Covid-related — it is just suddenly they find a way of achieving that plan because of Covid,” said Oakley.