The News: Tale of Two Financial Meccas

The financial services meltdown has and will continue to yield job losses in New York City, the financial capital of the United States. But in a recent CB Richard Ellis Investors Investment Research Quarterly report, Sabina Kalyan and Nadja Savic pose an interesting question: Will New York City’s office market fare worse than that of the world’s other financial capital, London?The report notes that the performance of the U.S. and U.K. economies has correlated closely during the past 40 years. Employment cycles in the cities’ financial and business services sector are also similar. Through the second quarter of this year, job losses in the U.K. financial and business services sector reached 26,000, 0.4 percent of the sector’s total workforce. In the United States, the count hit 0.6 percent, or 155,700 workers.The merger of HBOS Plc and Lloyds TSB will likely prove London’s biggest job killer, according to the report, which predicts that a large portion of the 4,000 HBOS employees in London will lose their jobs. Lehman Brothers Inc., meanwhile, employed 10,000 people and occupied 2.5 million square feet in New York City. The report’s authors point out that while that forms a large block of space, it is less than 1 percent of the city’s 432 million-square-foot inventory of office space.Ultimately, London may pay more of a price for the financial meltdown than its U.S. counterpart. Due to cheap financing and a mayor who actively encouraged large-scale redevelopment projects, a great deal of office development went up in London from 2004 to 2007, the largest office development pipeline since the late 1980s. New York City’s office development has advanced at a much slower pace; in no one year from 2007 to 2010 did Downtown and Midtown office completions exceed 1 percent of office stock. In London, however, completions exceeded 7 percent of inventory in 2009 and 2010.