Friday 30 September 2016

Shortage of European office space may torpedo plans for banks to leave UK

Published 26/05/2015 | 08:23

Canary Wharf in London. Several firms have threatened to leave London if the UK exits the EU but they cannot move to Dublin because of the lack of office space
Canary Wharf in London. Several firms have threatened to leave London if the UK exits the EU but they cannot move to Dublin because of the lack of office space

A shortage of prime office space in rival European financial centers may torpedo plans by some of London's banks to quit the UK capital if Britain opts out of European Union membership.

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Prime Minister David Cameron has promised to renegotiate Britain's relationship with the EU and then hold a vote by the end of 2017 on whether to stay in the bloc or leave.

Deutsche Bank, the euro zone's second largest bank by assets, confirmed this week it was considering cutting its UK operations if the country pulled out, and other big global banks are expected to rethink the scale of their UK operations under such an eventuality.

But decamping from their expansive London homes to Frankfurt, Paris or Dublin would be no simple task.

"None of the major European cities could cater for that kind of demand at the click of fingers or even with six months notice," said Mat Oakley, head of commercial research at global real estate consultancy Savills.

"The markets across Europe are pretty tight in terms of vacancy rates and lenders are so risk averse in terms of speculative office development that a bank would have to do a pre-let (commit to rent a property before it has been built), or buy a site," he said.

Both of those options would incur large unnecessary costs if the UK stays in the EU.

"The potential referendum on EU membership bothers many of our clients immensely," said Miles Gibson, Head of UK Research at real estate advisor CBRE.

"Even though we think the PM would campaign for an 'in' vote and would ultimately win, the sooner he can resolve this issue, the better."

Reuters

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