HSBC will nearly halve its office space in the coming years in one of the most radical calls on working trends in the wake of the global pandemic.
Europe’s biggest bank will vacate 40 per cent of its offices in London and other cities around the world but keep its headquarters in Canary Wharf, it revealed as it reported full-year results.
HSBC’s plan, part of a commitment to cut costs and improve its returns, will intensify pressure on landlords. Office vacancy is up 45 per cent year-on-year in the City of London to 6.9 million sq ft, a similar level to that seen in the global financial crisis of 2008, according to DeVono Cresa, the property consultancy.
Rents for the best office space in London have fallen by between 5 per cent and 6 per cent in the past year.
Businesses across the country are reviewing their office requirements as the pandemic leads to permanent lifestyle changes. The government road map to loosening restrictions will not see workers encouraged back into offices before June 21.
HSBC employs 40,000 people in the UK, where it has 66 offices spanning 3.3 million sq ft. Its global headquarters is in a 46-storey building in Docklands, while it also had several other offices across London, including on the South Bank, where it agreed a multi-year deal in 2019 to take around 1,100 desks from WeWork, the serviced office operator.
The bank also has regional hubs, including at Birmingham’s Arena Central, where it has moved its UK retail banking headquarters.
Noel Quinn, chief executive of HSBC, said the plan to cut office space by 40 per cent in the “long term” was driven by expectations that there would be “a very different style of working than before”.
HSBC’s total real estate costs are “several billion”, so reducing the footprint when leases come up for renewal or through sales is a “material opportunity”, according to Ewen Stevenson, the bank’s chief financial officer.
The group’s call contrasts with rival financial institutions. Jes Staley, the boss of Barclays, said last week that working from home was getting “old” for employees. Barclays is holding off on making any decisions about its own large office portfolio for the moment.
NatWest has only closed one office in London since the Covid crisis, Regents House in north London, and has not laid out any further plans for reducing communal working space. Lloyds is due to give an update on its plans for offices tomorrow alongside its full year results.
Shaun Dawson, head of insights at DeVono Cresa, said: “The pandemic has given more traditional office occupiers the impetus to change, and I think for those who are already adjusting to different working practices, it’s just giving them the drive to continue with rationalising floorspace.”
Across central London, there is 18.5 million sq ft available, up 12 per cent on the previous quarter and 36 per cent higher than the previous year. There is around 2 million sq ft of office space available in Canary Wharf, up 6 per cent on the previous year.
While HSBC made a commitment to its Canary Wharf head office, some believe it will review the building before its lease comes up for renewal in 2027.
Branches have not been included in HSBC’s planned closures but the bank, along with its competitors, is expected to shut hundreds in the coming years.