As banks continue to recover from the last financial crisis they also face heightened regulation, potential for security breaches and a squeeze on expenses. This, according to a new report by JLL, is having a major impact on their real estate decisions.
While banks still represent the largest occupiers of trophy Class A office space in Boston and most major cities, the financial services industry is changing its office and retail footprints. Banks are consolidating personnel in less expensive locations, new financial tech companies, or ‘fintech’ players are emerging and retail banks are evolving altogether.
From a real estate perspective, the financial services sector has become much more complex than it was. We’re seeing divergent needs among different segments, impacting the office, retail and call center markets.
The overall economy continues to expand here, however the banking and financial services industry has had a slower and steadier recovery. Major financial institutions including State Street, Liberty Mutual, Fidelity and Manulife have maintained the same headcounts in the city. However, due to increasing rents Downtown, these firms are actively seeking ways to reduce their real estate costs while maintaining space efficiency.
This year may be a different story. Our market could record absorption from asset management companies as they actively tour the landscape and narrow their options. While renewals remain an option, these companies could choose to sign build-to-suit leases in the Seaport given the district’s availability of developable parcels. This will afford them opportunities to create new space configured to meet their real estate needs.