Out of office: Lloyds, Metro Bank join retreat from workplaces

London

IT has been a bad week to be a landlord to a bank. Lloyds Banking Group has joined the list of lenders rushing to slash office space as the pandemic prompts a re-think on the need for pricey real estate.

The UK's biggest mortgage lender said it expects to cut its office footprint by about 8 per cent this year. That will put it on course to reduce its total workspace by about 20 per cent till 2023.

Meanwhile, Metro Bank showed that even new challenger firms are burdened with legacy property issues in the wake of Covid-19.

The firm, founded in 2010, booked a £41 million (S$75.9 million) charge that is partly due to its decision to vacate an office close to St Paul's Cathedral in London, said a statement on Wednesday.

Metro signed a 10-year lease for the space as recently as 2017 and decided to exit early last year, initially planning to move to a cheaper option outside London - but will now let staff work from home instead.

Those moves worsen the grim picture emerging for the owners of office space leased to financial firms.

HSBC Holdings, Europe's largest lender, said on Tuesday it expects to eventually shrink its property footprint by 40 per cent, while rival Standard Chartered has said that about half of its staff will be able to apply for some form of hybrid work.

Office rents in the City of London and Canary Wharf financial districts will fall by as much as 15 per cent this year, the most of any neighbourhoods in the UK capital, said property broker Carter Jonas.

"Weak demand and increasing vacancy from a rising volume of tenant-controlled space are factors that are conspiring to depress rents," Michael Pain, head of the broker's tenant representation team, said.

Still, financial firms have been downsizing their London office footprints for more than a decade and have long since been surpassed by technology companies and flexible office providers as the main drivers of demand. BLOOMBERG