More than 11,000 extra staff are forecast to be employed by banks and financial services firms across London over the next three years despite fears about regulation and taxation, reflecting renewed confidence in the capital and the wider economy.
The extra employees will require an additional 1.6m sq ft of space in central London, according to a study commissioned by BNP Paribas Real Estate – equivalent to four towers the size of the Shard or five the size of the Heron Tower in the City.
By translating projected jobs growth into floor space, the bank expansion will mean an extra 550,000 sq ft of offices a year up to 2014, which would come on top of the typical annual take-up in the City of 3.1m sq ft. About three-quarters of financial groups said business would grow over the next three years, with 55 percent saying they would increase employment. Of those forecasting growth in London jobs, more than 70 per cent had their headquarters overseas. Most of this growth was focused on “front house operations” rather than support staff.
Smaller financial services firms expected to see the strongest growth, with the biggest banks only expecting very modest increases.
Fred Hargreaves, head of BNP Paribas Real Estate’s City agency, said the banks’ plans should translate into occupier demand and considerable extra take-up.
"There will be a lot of smaller firms taking larger offices, a lot like how the recovery started after the dotcom bust in 2003 and 2004. Taxation is a big concern however,” he said.
This was good news for the number of towers planned in the City, he added, which typically offered smaller floors. There was a strong rise in demand among hedge funds and private equity firms in the West End, closely correlated to the stock market recovery.
The survey highlighted continued concerns among financial services groups about the future role of the government. More than three-quarters said there were fears over “poorly thought-out regulation of banks”, and more than two-thirds said there were worries over “increasing taxes on banks and bankers”.
Mr Hargreaves predicted major office moves in 2012 and 2013 given expiries of leases agreed in the late 1980s and late 1990s. There was no dramatic rental increase predicted this year, he said, but little new space would be available in 2012 and 2013 which should support rental growth.
The research, carried out every two years, has proved accurate in highlighting the boom in 2005-2007 as well as the crash after 2008.
Mr Hargreaves said the growth of the banks would mean further demand for office space from associated and support services.