LONDON (Reuters) - Total job losses in London’s City financial district are likely to hit 40,000 due to fallout from the U.S. subprime crisis and global credit crunch, analysts at JPMorgan said on Tuesday, doubling their previous estimates.
The shakeout equates to 5 percent of jobs compared with losses of 7 percent after the dotcom bubble burst in 2000-01.
But the number of jobs in the City has grown dramatically since then on the back of a strong international economy and booming markets.
JP Morgan estimated last December that 20,000 City jobs would be lost in the current financial crisis.
In a note published jointly last week by JPMorgan banking and property analysts, the U.S. bank warned of severe job cuts in 2008 and 2009 after an initial 10 percent cull of staff in debt securitisation, private equity, and other investment banking departments hammered by the turmoil in financial markets.
Analyst Harm Meijer told Reuters on Tuesday that a widely reported forecast of 19,200 cumulative City job losses by the Centre for Economics and Business Research, an economics think-tank, was too optimistic.
That was despite the fact it was based on a wider definition of the “City” financial district, which included Canary Wharf and parts of the West End, but excluded non-financial employment.
Meijer said on a like-for-like basis, JPMorgan expected up to 28,000 City job losses.
Based on a rough space requirement of 150 square feet per office worker, 40,000 jobs equates to about 12 of London’s landmark “Gherkin” buildings, adding to the potential overhang of supply just as completed developments begin to peak.
As a result, City vacancy rates were likely to peak at 12.2 percent in 2009 while City office rents were set to fall by 16 percent in 2008-2010, JPMorgan said.
The hedge fund haunt of London’s West End would also not be immune, with rents seen dropping by almost 9 percent in the period, it said.
Only Madrid of the key European office markets featured in JPMorgan’s report was seen as more vulnerable, with a flat jobs market and a likely 22 percent drop in rental growth in the next three years.
Reporting by William Kemble-Diaz; Editing by David Cowell