Employment in financial services may be falling, but confidence is up. And with business volumes rising and costs under control, profitability is recovering too. No wonder the sector is taking big property decisions.
And I don’t mean threats by the likes of HSBC and Standard Chartered to quit the UK; red herrings, to this industry at least. Such moves would be symbolic: HQs and chief executives’ entourages may ship out, but the large majority of employees would stay. And in HSBC’s case, a strong, focused UK retail arm – with clear red water between the high street and investment operations – could be a good thing.
More significant is the progress being made by challengers like Metro Bank, which is set to prelet 150,000 sq ft of offices in Croydon (p34). It reveals the scale of the bank’s ambition and so is significant for the wider financial services industry. Of course, it matters to Croydon as well, showing the rejuvenated south London borough can compete with the likes of Stratford.
Alongside all this, the changing nature of banking is reshaping the sector’s real estate needs. With employment growth strongest in compliance and technology functions, the need to be near the City of London is diminished – to the benefit of the likes of Croydon and Birmingham. HSBC is moving around 1,000 staff to England’s second city within the next five years; Deutsche Bank has also expanded there.
But it’s not all about moving out. Deutche’s latest move is to open what will be its largest London office at Canary Wharf (p31). EG first tipped the move 20 years ago; it is perhaps our slowest burning story. The bank may have reduced the number of buildings it occupies in London from 21 to 16 in the past five years, but decisions taken by incumbent and challenger banks alike will continue to dictate fortunes in much of the property sector in the years ahead.
Speaking of financial services, former banker Richard Dakin (once of Lloyds, now of CBRE) writes his first column in EG this week. He offers a punchy warning about the risks of property companies changing their business models in the pursuit of assets in the current fiercely competitive market. “It is far easier to make mistakes,” he warns. Heed his advice on page 43.
EG is launching a new international competition to source ideas from property’s forward thinkers and innovators. The Next Big Thing, in association with Cluttons, RICS and Sectorlight Strategic Marketing, is looking for your ideas on how urban development can serve soaring populations in the planet’s big cities. Judges include some of the biggest names in global real estate. The winning entry – 22 June is your deadline – will feature in Estates Gazette and the winner will receive £1,000. Find out more and how to enter at www.thenextbigthingcompetition.com
A brief word on the election and contrasting comments from two property bosses after the polls opened on Thursday. “The commercial property market is susceptible to the impact of general elections as many business owners take a wait-and-see approach,” said Chris Day, managing director of Christie + Co. Derwent chief executive John Burns was more sanguine. “Time will tell how the outcome affects the central London office market or the broader capital markets,” he said.
Of course, the comments highlight a lack of certainty in the result and the colour of the next government. But they also speak volumes about how the impact will vary even within property, let alone the wider economy. For Burns, dealing with larger occupiers in a world city: “Both occupational and investment demand for our office properties is strong and we remain confident about the prospects for both rental growth and yields in 2015.” Day, running a business with a strong national footprint in leisure and in health: “Clients and potential clients will all feel the effect of the election outcome.”
Clarity, quickly, is key.
