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Strong movement in the rental market

The banking sector strengthens its position in Europe.

Strong movement in the office leasing market in the banking sector in Europe

Level of office space lease for banks in Europe is 20 percent. above the average of the five years.

·         Most active rental markets are Prague and Warsaw

·         Chinese banks continue to expand across Europe

·         Increased activity of European and American banks in Asia and the Pacific area

According to a report by Cushman & Wakefield, the banking sector has strengthened its position in Europe, as evidenced by the high level of activity in the office leasing market in the last 12 months. In the period from April 2010 to March 2011, the banks' demand for office space in Europe stood at 20 percent. higher than the average of the five years.

Over one million square meters of office space was leased, more than double compared to the decrease in activity on the rental market in 2009-2010. In the last six months the number of lease agreements for spaces bigger than 5 000 sq m increased compared to previous six months.

A dominant position is still held by the most important centers of banking, i.e. London, Paris and Frankfurt, which accounted for over 55 percent of all leases signed in the past year by the banking sector in Europe. The highest activity was noted on the rental market in London, which leased nearly 300   000 square meters, which accounted for 27 percent of aggregate demand in Europe. This number was highly affected by an agreement of pre-let lease of 65 000 sq m, which UBS signed in the third quarter of 2010

Most active rental markets are Prague and Warsaw.Warsaw, which is becoming a regional center for banking in Central and Eastern Europe, can boast an increase in demand by almost 63 percent compared with the average of five years. The level of rent in Prague for last year was 25 percent above the average.

Annual demand for office space in the banking sector, compared with an average of five years (sq m.)

Lack of supply of high quality in a number of locations in Europe caused a continuation of the trend of occupying the surface by their respective owners. This is particularly evident in London and Moscow. Prime rents are beginning to rise in many European cities and, therefore, the tenant is no longer able to get attractive prices in the pre-lets, which was possible even 6-9 months ago. In contrast to the two largest transactions in the first half of 2010, none of the major leases signed during the period from October 2010 to March 2011, has been a pre-let type of contract.

The most important lease transactions in the European banking sector (from April 2010 to March 2011)

Town

Submarket

Localization

Tenant

Type of Transaction

Sq m.

Date

London

City and Docklands

25 Bank Street

JP Morgan

The needs of the owner

97 545

Fourth quarter 2010

Frankfurt

Europaviertel /

Messe

Theodor-Heuss-Allee 2

ING Diba

New lease

38 731

Fourth quarter 2010

London

City and Docklands

Building B1, King's Cross Central

BNP Paribas

The needs of the owner

32 515

Fourth quarter 2010

Moscow

ZAM

Letnikowskaja 2 street, bud. 4

Bank Otkrytie

The needs of the owner

25 038

Fourth quarter 2010

Moscow

CTY

1-й Красногвардейский Проезд, владение 15 (участок 13)

VTB

The needs of the owner

16,000

First quarter of 2011 2011

Milan

The periphery of the center

Ferrante Aporti - Block B

State Street Bank

New lease

9 700

Fourth quarter 2010

Madrid

M-30

Isabel Colbrand, 4

BBVA

New lease

8 900

First quarter of 2011 2011

 

Source: Cushman & Wakefield 2011

Chinese banks continue to expand in Europe, recognizing the growth opportunities in the credit market, which is large, but is now characterized by a supply shortage. These banks are gaining thanks to the caution of local actors. One of the first Chinese financial institutions in this market was the Industrial and Commercial Bank of China (ICBC), which has opened offices in London, Moscow, Luxembourg and Frankfurt. ICBC plans to open five more branches next year in Paris, Amsterdam, Brussels, Madrid and Milan.

European and American banks, in turn, show the opposite trend and increase its presence in Asia and the Pacific area. JP Morgan has announced its expansion in Sydney, and Lombard Odier and Spanish bank BBVA have recently leased office space in Hong Kong.Barclays Capital, BNP Paribas and Bank of America have decided to set up operations in Singapore. However, in India, a large surface was leased by Bank of America, RBS and HSBC. Russia's largest bank Sberbank is the first Russian financial institution started to expand outside Europe, opening a branch in India. Currently, they are planning to enter the Chinese market.

The most important lease transactions of the European and American banks in Asia and the Pacific area (from April 2010 to March 2011)

Country

Town

Localization

Tenant

Type of Transaction

Sq m.

Date

China

Hong Kong

2 International Finance Centre

BBVA

-

1 413

First quarter of 2011 2011

China

Hong Kong

Two Exchange Square

Lombard Odier

-

697

First quarter of 2011 2011

Singapore

Singapore

Marina Bay Financial Centre, Tower 2

Barclays Capital

Relocation / expansion

23 222

First quarter of 2011 2010

Singapore

Singapore

Ocean Financial Centre

BNP Paribas

Relocation / expansion

13 935

First quarter of 2011 2011

India

Mumbai

Nirlon Knowledge Park

Citibank

Relocation / expansion

8 910

Third quarter 2010

India

National Capital Region

Unitech Infospace

Bank of America

Relocation / expansion

11 148

Third quarter 2010

Source: Cushman & Wakefield 2011

Matthew Knight, Associate of the team for the banking sector of the countries of the EMEA (Europe, Middle East and Africa) at Cushman & Wakefield, said: "We observe further movement in the European banking sector, that is reflected in the significantly improved office space market. However, several issues still affect the banks, which is highly uncertain. Potential restructuring of Greek debt will have important consequences for Greek banks and foreign banks with assets invested in bonds of the country, especially German banks, whose potential losses could reach nearly 20 billion Euros. This may subsequently touch the Ireland and Portugal."

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