Office leasing activity by Europe’s banking sector rises in London and Paris

7 Jul, 2008, Warsaw

• Paris was the most active market in Q1 2008, while London rose from its low point in Q4 2007.
• A number of ‘legacy’ deals, initiated prior to the credit crunch, were behind the rises, however, in general the banking sector across Europe remains subdued.
• On a positive note, there is little evidence of banks putting surplus space on
the market.

Take-up by Europe’s banking sector was down 6% in the first quarter (Q1) of 2008, compared with Q4 2007, as the banking sector continues to struggle with the effects of the credit crunch, according to the latest European Banking Business Briefing by global real estate consultant Cushman & Wakefield.

Around 222,000 sq m of transactions were put through in Q1 2008 by the banking sector in Europe’s top 15 banking locations. Take-up by banks accounted for more than 10% of all office take-up in Q1 2008.

Guy Douetil, Head of the EMEA Banking Group of Cushman & Wakefield, says: “Take-up has continued to move down in the first quarter of this year as banking activity slows. However, much of this activity comes from a small number of large transactions initiated before the onset of the economic uncertainty. Encouragingly they have now completed, despite fears that they may have been stalled by the credit crunch.”

In Q1 2008, Paris-Ile de France was the European location recording the highest volume of transactions, at almost 85,000 sq m, followed by Frankfurt and London’s City & Docklands sub-market, which rose from its low point of 3,500 sq m in Q4 2007 to more than 25,000 sq m in Q1 2008. Then comes Prague, in fourth position.

Paris-Ile de France also recorded the most significant deal in Q1, with the leasing of 60,000 sq m by LCL (Le Crédit Lyonnais) in the southern Parisian suburb of Villejuif.

Denis Samuel-Lajeunesse, President of Cushman & Wakefield in France, comments: “The LCL transaction illustrates that the ‘rebalancing’ of the Paris/Ile-de-France office market is still ongoing, with the main driving forces behind demand being consolidation and rationalisation, allowing us to remain reasonably optimistic about the market. Certain rising markets in the inner suburbs are still attractive to major occupiers, and particularly banks for their back-office functions, looking for cheaper rents and good transport accessibility. Despite the wait-and-see policy of certain occupiers, we take the view that large-scale transactions are yet to be done in order to reduce property costs and to meet the need to modernise businesses.”

Looking forward, across Europe, Guy Douetil says: “We are not expecting the banking sector to take strategic real estate decisions in the short and medium term unless there is a firm business or financial reason to do so, or their lease is expiring. The good news, though, is that compared with previous downturns, banks are already using space efficiently, having reappraised their requirements following the Asian financial crisis in the late 1990s and the dot-com crash in 2001/2, which means that there is unlikely to be a great deal of sub-let space come onto the market in the short term.”

Jakub Marszałek, Analyst at Cushman & Wakefield’s Office Department in Warsaw, says, “In 2007 the banking sector leased over 66,000 sq m of office space in Warsaw, which accounts for approx. 13.5% of last year’s total take-up. This year the banking sector continues to be active in the office space lease market, but the volume of transactions is expected to be lower than it was last year. Despite the tight international markets, the banking sector in Poland is in good shape and continues to develop. At present, several banks are looking for new office space to occupy within the next three years. Their demand is estimated at approx. 70,000 sq m, but some of the transactions will not be completed until next year. Most of the deals involve consolidations of large banks and expansion of smaller financial institutions.”

Banking take-up in Europe’s key banking locations

	Banking take-up Q4 2007 (sq m)	Banking take-up Q1 2008 (sq m)
Paris - Ile de France	53,435	84,463
Frankfurt	48,200	34,600
London - City & Docklands	3,580	25,030
Prague	13,650	21,571
Amsterdam	10,100	20,225
Warsaw	9,681	9,066
Budapest	16,092	5,740
Milan	3,500	5,400
Brussels	3,261	4,534
Moscow	38,000	3,344
Barcelona	15,756	2,640
London - West End	9,217	2,415
Madrid	4,518	1,757
Glasgow	843	919
Edinburgh	5,806	0
Totals	235,639	221,704

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