Is the "Brexodus" overstated?
While many people are predicting the demise of London’s banking industry in the wake of the Brexit vote in 2016, recent research
suggests that perhaps there may be room for greater optimism than originally thought, particularly in the context of the city’s office market.
Initial estimates of Brexit’s impact on landlords in the City and Canary Wharf were that an estimated 40,000 staff in the financial services sector could be moved overseas, causing a 4 million sq ft shortfall in office occupation.
However, this is contradicted by the fact that many of these occupiers do not have the flexibility to move that is implied by the figures quoted above. For instance, at the turn of the millennium in 2000 and 2001, a large number of pre-let deals were signed by financial firms, often on long term leases of between 20 and 25 years. Therefore, lease expiries on these deals would not be coming up for several years yet.
Each company has its own agenda and plans also. There has been much speculation about which companies are planning to move staff; however, even some of those rumoured to be moving are still planning to occupy a new London headquarters in the near future. These include UBS, Goldman Sachs and Lloyds’. Goldman Sachs is even developing its own building.
With this in mind, it is possible to take the view shared by many landlords that the impact of Brexit on the London office market will, in fact, be minimal. Many people even hold the view that this is, in fact, a cynical move by the banks, who are simply threatening to move in order to get a better deal from the UK government for their companies during negotiations. The logistical and financial costs to the banks of moving staff out of London would certainly be considerable.
Therefore, while concerns remain over the possible dwindling of financial firms occupying London office space, there is still room for confidence and optimism that the market will prove resilient to the challenging conditions it faces going forward.
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