The escalating cost of office space in London is forcing many businesses to re-evaluate which roles warrant a permanent desk in the capital.
According to DTZ’s (now Cushman & Wakefield) 2015 Global Office Thermometer, the average cost of a workstation in London hit £19,820, a 16% hike on 2014. The same money could buy almost four desks in Birmingham, or five in Newcastle.
Some occupiers are prepared to take the hit of escalating costs to continue to satisfy clients, attract and retain talent. Yet an increasing number are opting to locate at least some staff elsewhere.
“A high-profile Mayfair desk is probably only really used 40% of the time and there will be an increasing number of businesses that reduce the number of permanent desks in an office whilst increasing the areas allocated to touchdown space,” said Sam Sahni of workplace specialist Morgan Lovell.
Who goes might surprise some. “The roles that are relocated will certainly not all be back office”, said CBRE’s Mark Pollitt. “HSBC will be bringing some quite primary functions to Birmingham.”
HSBC announced in March 2015 that it is relocating around 1,000 staff from Canary Wharf to the Arena Central development in Birmingham, while Deutsche Bank opened in Birmingham in 2006 and now employs around 1,500 people across two buildings. The bank occupies around 250,000 sq ft, including a trading floor from which it is servicing a number of clients previously managed from London.
A spokesperson from the bank said: “Our presence in Birmingham allows us to serve a mid-market client base in a cost-effective manner and we can also cover clients that would be uneconomical to service out of London.”
Law firms are at the leading edge of this with some relocating more senior roles and using lawyers in lower-cost locations as an extension of their London teams. Be it Allen & Overy opening a Belfast centre in 2011, or Hogan Lovells opening a new office in Birmingham, finding ways of reducing the London footprint is a growing priority. Meanwhile, magic circle firm Freshfields Bruckhaus Deringer is to open an 80,000 sq ft global service centre at Salford office scheme, One New Bailey.
As London lease expiries loom and occupational costs in the capital rocket, there is plenty of incentive for other banks to follow suit.
