Barclays to save millions with office sublet to govt

London - Barclays agreed to sublet office space in London’s Canary Wharf financial district to the UK government, saving the cost-pressured British bank about £35m ($45m) a year.

The Cabinet Office will lease about 540 000 square feet (50 168 square meters) of space in 10 South Colonnade, according to a statement on Barclays’s website Tuesday. IT and human resources staff formerly in the building are being moved to Barclays’s headquarters at 1 Churchill Place or the investment bank office in the same district, a spokeswoman said by telephone.

Chief executive officer Jes Staley has said Barclays can make “tremendous savings” by reducing the amount of real estate it owns and leases, with headcount set to fall by a net 17 000 this year. The bank took a £150m charge in the third quarter related to the property disposal, which Staley said equates to the elimination of around 5 000 desks, or a quarter of its London office space. 

Barclays’s move could be the first among a series of real-estate reduction programs in London as European banks seek to cut fixed costs and improve profitability, Bloomberg Intelligence analyst Jonathan Tyce said in a report October 28.

“The impact of technology, as well as relocation risks heightened by Brexit and passporting concerns, point to further structural cost reductions that could involve significant real-estate retrenchment,” Tyce said. “The structural benefit to the fixed-cost base will become increasingly meaningful, and more than offset upfront charges.”

Rents for the best space in Canary Wharf were about £45 a square foot at the end of last year, compared with £70 in the City of London financial district, according to data compiled by broker Colliers International Group Inc.