The intensification of the financial crisis in the eurozone last year made many believe a new credit crunch and double-dip recession was imminent. The economic context appears to have improved since then, but risks remain nonetheless, as well as banks' cost-reduction plans. Many have recently announced new rounds of lay-offs. Clearly, the European office markets with a stronger concentration of financial services in their occupier base are those most exposed to developments in this sector, althought not necessarily in the same way. Data show that London, together with Zurich and Genevan are the European cities whose economies are most dependent on financial services' activity, with the financial sector making up over 10% and 20% of their workforce and total output respectively.
The analysis of the contribution of financial services to take-up across the mail European financial centres revealed an overall decline in demand from this sector last year, particularly in London. In some cases, it may be that the effects of reorganisation and cost-cutting in the financial industry will take more time to unfold and be reflected in occupier market indicators.
While economic performance remains the key driver of the pattern of employment in the financial sector, it is not the only element that needs to be monitored. At a time where there is growing demand to make financial companies more accountable and efforts are made to reduce systemic risks in the banking sector, regulation is also set to play a key role in determining the trajectories of the European financial centres and their position relative to other competing global financial hubs.
Source : CBRE