In the European office space markets, banks and insurance companies traditionally account for approximately 25 % of the demand per annum. Their business models are currently being challenged by fast and innovative, disruptive acting start-up companies – will this have an impact on future demand for office space?.

Demand for office space declining among traditional finance businesses – fintechs penetrating the market 

The finance sector is currently undergoing a process of fundamental change. A comparison over time of the number of employees in this sector shows that, while there were 9 % more people working in the sector at the major European hubs in 2014 compared with the ten previous years, the demand for office space nonetheless fell by 17 %. This suggests that space is being used more efficiently. And now there is an additional market factor, with the emergence of fintechs. And it is doubtful as to whether this market factor can offset the emerging shortfall in demand. The term ‘fintech’ is a portmanteau word combining ‘financial services’ and ‘technologies’, and represents a class of IT start-ups that are setting out to muscle in on the shares of the market held by traditional banks, insurance companies and financial service providers. The array of companies within this segment ranges from mobile or Web-based payment systems to account management and investment concepts and strategies (“robo advice”). What they all have in common, however, is that they are doing away with physical service provision in favour of digitisation – the customer is increasingly becoming the producer of the services. 

The ‘visible’ bank (service) at a location is increasingly becoming invisible. Concrete fintech services include: 

  • Banking: fast, individual and straightforward account management 
  • Insurance: customer-oriented insurance concepts 
  • Loans: granting private loans and providing apps to compare loans 
  • Payment transactions: new payment methods with low transaction costs and straightforward processing 
  • (Share) trading: new portfolio management concepts and optimisation of investment strategies

It is not currently clear what impact the emergence of fintechs will have on office space demand in the local real estate markets. Having said that, there does appear to be a fintech ‘DNA’ with regard to where they set up business. One thing which certainly is clear is that the investors have high expectations of the market. They are betting billions on their future succ