Work-from-Home Unleashes Nightmare for Office Landlords & Surrounding Businesses. Global Banks at the Forefront

“There will be a long-term adjustment in how we think about our location strategy…the notion of putting 7,000 people in a building may be a thing of the past”: Barclays CEO. And companies are following through.

This appears to be an increasingly global phenomenon. Roughly 60% of bank executives in the US said they don’t expect all of their employees to return to the office. And over 40% said they plan to reduce their real estate footprint in response to the coronavirus pandemic, according to a survey of US bank executives by Accenture Plc.

Some banks are already making long-term changes. In Midtown Manhattan, French megabank BNP Paribas renewed its lease at the 787 Seventh Avenue tower. But it shrank its footprint by 38%: According to the Commercial Observer, instead of renewing the lease for the 454,200 it currently occupies at the building, it signed a lease for only 280,000 square feet.

In London, large financial institutions are the biggest tenants of the toniest commercial real estate. And they are now seriously reevaluating not only how much workspace they require but what sort of form it should take. Even allowing for physical distancing measures, such as the separation of desks, most companies now have a lot more office space than they think they’ll need, especially if they end up laying off large numbers of workers when the government’s job retention scheme comes to an end, which is scheduled to happen in September.

Goldman Sachs and Nomura said over the weekend that they plan to send only 10% of their UK workforce back to their City of London offices.

Last week, the 30 biggest employers in the City of London said they only intend to bring 20-40% of their workforce back in the coming months.

One of the UK’s “Big Four” banks, RBS (which was renamed “Natwest” today in yet another re-branding exercise for the scandal-tarnished lender) announced that close to 50,000 of its 63,000 workers will continue working from home, at least for the rest of this year.

“Like we’ve done throughout the pandemic the decision has been made carefully, including considering the latest guidance from the UK Government on Friday and our own health and safety standards and procedures,” said a spokesman for RBS. “It’s a cautious approach but we feel the right one to take currently.”

“Work from home if you can.” That was the blanket message the UK government sent out to all non-essential workers during the darkest days of the Covid-induced lockdown. Now that the lockdown is easing, the government is frantically trying to reverse the trend toward working from home, which it itself set in motion and which is unleashing myriad negative impacts across the economy. It has even relaxed the safe distance rules from two meters to “one-meter plus.”

That the British government can’t even persuade RBS — which is still 63% owned by the British State following the bailout during the Financial Crisis — to get its workers back into the office does not augur well for its efforts to halt or reverse the trend toward home working.

Continue reading the article on Wolf Street

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