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News release


Canadian Banks and Financial Sector Seeking Optimization and Consolidation

JLL reports shows industry adjusting footprints in Toronto and Montreal

TORONTO, May 15, 2015 – Banking and financial institutions continue to rein in real estate expenses in response to tight profit margins, according to JLL research. Corporate offices in North America shrunk from 52,356 square feet on average in 2013 to only 44,768 in 2014 and nearly 46 percent of financial services office transactions involved relocations, mostly in-market, while only 24.8 percent were lease renewals.

The same theme has translated to Canadian financial hubs, which saw several major financial firms taking steps to consolidate or optimize their real estate footprint. Big banks in Toronto and Montreal are revamping their office space and moving large portions of their back office functions to the peripherals of the central business district, keeping just enough space in their trophy buildings to maintain naming rights.

"When it comes to real estate decisions, major financial institutions in both Toronto and Montreal are focusing on optimizing the space that they have while moving large portions of the back office functions to the peripherals of the Financial Core", said Brett Miller, President of JLL Canada. "This is leaving large blocks of space available in their primary towers, leaving an opening for smaller institutions to move in and take advantage of the benefits of being in the heart of the financial district."

Toronto's top-tier CBD is 52.2 percent occupied by banks and financial institutions, second only to the New Jersey – Hudson Waterfront market for the highest total in North America. As Canadian chartered banks shift their office footprints, there will be significant availability of trophy assets in a market dominated by the financial sector, according to JLL's North American Banking and Financial Outlook.

There is also the potential for a large user to kick-off new development. Toronto will see 4.7 million square feet of office space coming in over the next three years, but as these sites lease up, large financial institutions may be challenged to find many contiguous options above 100,000 square feet in the existing office inventory.

"Many of these financial institutions will need lead time to evaluate their leases and current real estate portfolio," Miller said. "As we saw in 2014, a large majority are considering relocation as a first option, and that could directly impact future development."

According to JLL's report, the average office is now 14.5 percent smaller than it was in 2013. Banks continue to reduce the ranks of research analysts, traders and investment bankers as risk guidelines make these divisions less profitable. In contrast, back-office staff has grown to accommodate increased legal, regulatory compliance and cyber security requirements.

Other key takeaways from JLL's banking report include:

  • Global investment in Financial Technology – or "fintech" –  is on track to reach $8 billion by 2018. While some elements of the FinTech revolution threaten the traditional banking model, some facts offer opportunities, including cybersecurity and regulatory innovations.
  • Banks and financial institutions are still feeling the pain of the financial crisis – even seven years later. In the fourth quarter of 2014, a $4.4 billion increase in litigation costs contributed to a 7.3 percent decline in total industry earnings.  Data security is also a growing pain point as the total cost for a data breach increased 15 percent in 2014.
  • Bank branches, despite what you may think, are not obsolete. In fact, a 2014 survey by the FDIC showed that more than 78.8 percent of respondents used a bank teller over the past year. The key to success for the industry will be to create interesting connections between physical and digital channels that foster an ongoing and seamless experience for the customer.

JLL is Canada's fastest growing commercial real estate firm. JLL has two offices in Toronto, with the headquarters located downtown. The firm also operates in, Mississauga, Montreal, Ottawa, Vancouver, Calgary and Edmonton. JLL manages over 50 million square feet of facilities across Canada. The firm offers tenant and landlord representation, project and development services, investment sales, advisory and appraisal services, occupier strategies and solutions, hotels and hospitality, debt capital markets, and integrated facilities management services to owners and tenants in Canada. 

About JLL

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000.  On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment  management business, LaSalle Investment Management, has $53.6 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit