WFC Wells Fargo and Company

By Art Patnaude and Joshua Jamerson 

Wells Fargo & Co. on Monday agreed to buy a new London headquarters building, completing one of the biggest commercial real estate deals in the U.K. since the referendum to leave the European Union.

The San Francisco bank bought the office in London's main financial district from Slovak developer HB Reavis, which is due to finish construction on the 227,000-square-foot building in the autumn of 2017, the companies said.

Wells Fargo paid around GBP300 million ($395.6 million) for the building, a person familiar with the deal said.

The U.K. commercial real-estate sector has been among the hardest hit after Britons voted to leave the EU late last month. Major asset managers have halted trading on their U.K. property funds, while analysts widely predict real-estate values to fall.

Foreign financial firms that rent London office space have been a point of concern for landlords and property investors in London, where the skyline is dotted with cranes that have sprung up during a construction boom.

At the moment, foreign institutions can sell their services across the EU from London. With Britain outside the EU, they could lose this "financial passport."

If firms decide to move to Frankfurt, Paris, or other European capitals, leaving behind empty London office space, property values could drop. Around 4% of the total London office occupier market could relocate, according to analysts at Swiss lender UBS.

Wells Fargo said it would move 850 employees currently in four London locations into the new building in 2018. The company said the move didn't portend job cuts.

A spokeswoman for Wells Fargo, Kathryn Ellis, said consolidating the bank's London-based employees was long in the works and would have happened regardless of the Brexit vote.

The move will allow the bank to "more efficiently and effectively manage our operations," said Frank Pizzo, Wells Fargo's regional president for Europe, Middle East and Africa, in prepared remarks.

Ms. Ellis declined to comment on whether a decline in the British pound factored into the decision to buy the new London development, 33 Central. The pound has fallen sharply in the wake of Britain's vote to leave the EU, and the stronger dollar against the British currency would make a purchase cheaper for Wells than it would have been before the vote.

"Many have doubted what will happen to the real-estate market after the Brexit vote," said Marian Herman, chief financial officer of HB Reavis, adding that the deal shows resilience "even under seemingly challenging market conditions."

The move will allow the bank to "more efficiently and effectively manage our operations," said Frank Pizzo, Wells Fargo's regional president for Europe, Middle East and Africa, in prepared remarks.

Last week Wells Fargo, the largest U.S. bank by market value, reported its quarterly profit fell 3% amid falling interest rates.

Wells Fargo stock edged up 0.5% to $47.96 in light premarket trading.

Write to Art Patnaude at art.patnaude@wsj.com and Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

July 18, 2016 09:44 ET (13:44 GMT)

Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Mar 2024 to Apr 2024

Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Apr 2023 to Apr 2024