Banks throughout Europe are looking to reduce their cost base and their real estate is key to that. In London, the market is heading for a "significant contraction" in banking space, according to a report this year by Cushman and Wakefield, which said capital ratio requirements set out in Basel III banking rules would force banks to cut property costs.

It surveyed 107 banks and financial companies and found a third would cut space within a year, while 54% were "very likely" to sub-let. They will be lucky to find tenants. Nomura is still seeking tenants for it's former home near the London Stock Exchange before a deal to buy the European operations of Lehman Brothers in September 2008 forced it to find bigger premises.

Rents for the best offices in the City office market have been flat at £55 per square foot for more than 18 months. Meanwhile, July’s vacancy rate was 7.4%, the highest since the end of 2009 and edging upwards, CBRE said.

In Canary Wharf, home to the largest number of bankers in Europe, Bank of America is considering removing back-office staff to its credit card business campus at Chester, where average rents are about half, two people familiar with the bank’s plans said. Though no decision has been taken and might not happen for several years, it would fit within a wider cost-cutting plan, phase one of which began in 2011 to save $5 billion a year and cut 30,000 jobs by the end of 2014. A Bank of America spokesman declined to comment.

Elsewhere, Citigroup, which has a 45-storey tower in Canary Wharf, has been busy recruiting staff in Belfast, where prime office rents are about a third of those in Canary Wharf. Though the bank opened in Belfast before the crisis, it was unlikely to have announced as many new jobs, including 500 in November 2010, without the drive for lower costs, a source familiar with the bank’s plans said. Economic conditions are considered alongside "the availability of talent, relationships with universities and proximity to business partners" when recruiting or expanding, a Citigroup spokeswoman told Reuters.

Even London hedge funds are looking at cheaper options beyond the glitzy streets of London’s West End.

Credit Suisse last month announced plans to raise 500 million Swiss francs by selling property under a plan to move some jobs to large out-of-town complexes such as the Uetlihof building near Zurich where 8,000 employees work.Earlier this year the bank received about £330 million from the sale-and-leaseback of its Canary Wharf office to Qatari investors.

London-based banks are more hamstrung than their rivals as many are locked into leases of 25 years or more, more than twice the typical length in mainland Europe, said Simon Wainwright, managing director of consultant J Peiser Wainwright. Leases signed today, however, would more likely be for 10 or 15 years as banks want to keep their options open, he said.

How times have changed. Nat West built a skyscraper in the shape of its logo, and the words ‘Midland Bank’ are still emblazoned in stone on its former London building," Wainwright said. "The psychology was different when banks did these sorts of things. They thought they would be around forever."