Brexit is testing the nerve of banks based in London.
The question of when and how the UK will leave the European Union, and what will become of banks’ ability to passport services into the Continent, has driven banks to reassess their London-heavy structure.
It’s a question that JP Morgan banking analysts Kian Abouhossein addressed in a note sent to clients on Monday.
Abouhossein took a look at office rents and capacity in different EU cities, with Madrid coming out on top both for cost and supply.
Here’s Abouhossein (emphasis ours):
“In terms of markets with high availability and high oncoming supply, Madrid places first, followed by Frankfurt and Paris.”
“In terms of prime rental levels, Madrid is the cheapest (€27/sqm/month) although brokers note there is a lack of Grade A office space, followed by Frankfurt (€40/sqm/month) and Paris (€67/sqm/month).”
Here’s how the cost compares with other cities vying for London’s financial crown:
And the Spanish capital also tops the list for percentage of vacant offices:
Madrid is also seeking to become the new home to the London-based European Banking Authority, according to a report in the Financial Times.
While office space cost and quantity aren’t the only criteria that investment banks will be looking at, where the EBA goes, it’s likely that a lot of banks will follow.