Fears of collapse in City office market

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The Independent Online
CITIBANK IS pressing staff at its investment bank subsidiary, Salomon Smith Barney, to move from Victoria to Canary Wharf in a cost- cutting move following the banks' merger.

The proposal to bring together staff from both banks at Citibank's new European head office has emerged as property experts suggest that City firms have pulled out of deals to take 400,000 square feet of office space in the past week as they freeze spending.

Property agents now fear that the City office market will collapse as firms axe thousands of jobs in the aftermath of the financial turmoil in world financial markets.

Citibank's 560,000-square foot new offices, being built at an estimated cost of pounds 200m, are meant to house 2,500 of the 6,000 people employed by Citibank in London but scattered around at least four different sites in the area. Insiders say the new office could house 3,000 if necessary.

Sandy Weill, the head of Citigroup, as the combined group is called, has already warned that 5,000 people will go worldwide as a direct result of the merger. The bank is now looking at whether further cuts are needed in the wake of the 67 per cent slump in third-quarter earnings for the group.

The 2,000 employees at Salomon's existing European headquarters above Victoria station in London now fear the worst. Salomon bought the lease outright.

There are fears that more job cuts will be announced in the next few weeks. The bank has warned that it lost $335m (pounds 200m) in the third quarter. A spokeswoman said yesterday: "We have no plans to move from Victoria Plaza at this time."

With Citibank's extensive London-based emerging market debt trading operation likely to be seriously pruned back, there is now a question mark over how much of the new Canary Wharf space will be needed.

Among the property deals that have collapsed are:

n US credit rating agency Moody's has pulled out of talks with Greycoat, the listed property company to take on 65,000 square feet at 7 Bishopsgate.

n Goldman Sachs last month shelved flotation plans which may cancel a requirement for 100,000 square feet.

n US corporate law firms Shearman Sterling, Davies Polk and White & Case last week cancelled plans to take on 120,000 square feet.

Property industry experts say that Bankers Trust has put on hold plans to lease another 700,000 square feet and has not yet signed a lease for overflow space at 33 Old Broad Street.