UK Banks Retool Branch Locations For Office Space Use
As the U.K.’s banks reconfigure their branches to accommodate a COVID-19 world, some are converting portions of the underused real estate into office space.
The Financial Times (FT) reported some banks will use the branches as an alternative to high-rise headquarters. So far, Virgin Money and Metro Bank plan to offer flexible workspace in branches while Lloyds Banking Group will test the concept beginning in October.
The strategy is intended to deal with the long-term impact of the pandemic. Large headquarters can’t accommodate the same numbers of staff as they did pre-pandemic amid social distancing requirements, FT reported.
London-based Metro Bank CEO Daniel Frumkin told FT his bank must spend money to redesign some of the space so it’s fit for purpose over the next few months. But he also said placing employees in branches will cut operating costs, reduce its carbon footprint and make it easier for branch staff to go to jobs that would previously have been at its headquarters.
The FT saw an email sent to Lloyd’s staff last from Matt Sinnott, the banks’ people and property director, that said the bank would test whether “surplus space in branches” could serve staff who previously commuted to one of its main offices.
Last month, European banks were preparing to take mega loan losses as COVID-19 continues to take its toll on financial institutions.
The EU’s largest banks estimated there will be at least 23 billion euros ($26.8 billion) in potential losses in the second quarter. That’s in addition to 25 billion euros ($29.1 billion) in defaults recorded in the first quarter.
Between 2015 and 2019, the number of bank branches in the U.K. shrank by more than a third, according to the Local Data Company, a London-based research company, FT reported.
Mark Dixon, CEO of IWG, formerly Regus, a multinational provider of short-term offices, business lounges and conferencing facilities, said the pandemic forced major companies to reconsider the logic of leasing expensive offices in city centers.
“Hub and spoke will be a major change for the property industry,” he told FT. “We were doing it for quite a few companies pre-COVID, but demand is exploding.”
Some larger buildings will also be “hibernated,” he said, so that Lloyds could “prioritize cleaning and resource in those which need to remain open.”