Canary Wharf, London, is trying to revamp its image as banks exit

The gleaming skyscrapers of London’s eastern skyline, built nearly 40 years ago, are home to the headquarters of the world’s largest banks and tens of thousands of office workers.

But when the work week begins these days, the towers in Canary Wharf are quieter and nearby restaurants more vacant – a result of the shift to remote work during the pandemic that has plunged office markets worldwide and soared vacancy rates. As companies adapt to hybrid work, many are shrinking their physical footprint.

HSBC is the latest, announcing recently that it will leave its old Canary Wharf headquarters in late 2026 and move its 8,000 staff to a smaller space in London’s central banking district about three miles to the west. Its departure, in the wake of many other businesses, has fueled speculation about the region’s future.

The move comes as the owners of Canary Wharf, a 128-acre financial services hub, seek to revitalize it, adding more housing, building laboratories to attract life sciences groups and hosting shows and cultural activities. Their vision, which has become even more important due to the pandemic, is to make the region A place to live, work and play – and not just for bankers.

There is evidence that the efforts are beginning to bear fruit. Now, the high-rises are filled with residents who walk their dogs along the area’s waterways. Grassy areas between office towers have been transformed into makeshift open-air cinemas, and swimmers bravely move the waterways between glass buildings. Many life sciences startups and healthcare companies have relocated, and traffic to Canary Wharf railway station on weekends in June is nearly twice as high as before the pandemic.

“It would be naive to think Canary Wharf hasn’t thought about how to deal with this problem for so long,” said Alexander Gann, chief economic adviser to the London Property Alliance, an advisory group to property investors and developers. “They are in a very strong position to adapt.”

Skeptics were unsure if the area could survive. Formerly a derelict turf until the 1980s when developers and entrepreneurs saw potential in huge offices, Canary Wharf has survived the commercial property crash of the 1990s, the bankruptcy of its first developers, Olympia & York in 1992, and fierce competition with London’s oldest banking district. . before being purchased by Brookfield Property Partners and Qatar’s sovereign wealth fund in 2015.

Canary Wharf Group declined to comment on the departure of HSBC. But its pressures have also hit downtown areas in cities like Chicago, New York, Houston and San Francisco, where landlords struggle to rent vacant office space. The value of commercial real estate in the United States declined by $506.3 billion in the three years ending in 2022, By one estimate.

This has also left many landlords in confrontation with lenders, who are less willing to make loans to owners of office buildings, at a time when higher interest rates have made borrowing more expensive.

The British capital faces the same difficulties, though to a lesser extent. Commercial property values ​​in the city have fallen, but the vacancy rate in central London was 8.4 per cent in the first three months of 2023, according to A real estate subsidiary of the French bank BNP Paribas, and 17.3 percent in Canary Wharf, according to real estate consultant Knight Frank. By comparison, Lower Manhattan had a record vacancy rate of 25.6 percent in the same period, according to real estate firm Colliers.

The Canary Wharf Group, which owns the land and about 40 per cent of its development, will have to weather the difficulties ahead. In a May report, ratings company Moody’s downgraded Canary Wharf Group’s debt, citing the faltering market, an upcoming £1.4m debt refinancing and pressure to sell assets at a discount.

In response to the downgrade, the group said that it is in a “strong financial position,” and described the report as a reflection of the broader market, noting that its total assets amounted to EGP 3.6 billion, or $4.7 billion.

Apart from HSBC, other departures include Clifford Chanceinternational law firm, any She cited flexible space requirements among the reasons she would move to a central London office in 2028. There is the potential for more to follow – the recent takeover of Credit Suisse by Swiss banking group UBS, and reports of ensuing layoffs, have called into question its rent. In Canary Wharf tower.

Clifford Chance, UBS and Credit Suisse declined to comment.

But even if more companies leave, analysts say companies in other sectors – perhaps those that would have been priced outside central London – will eventually take their place.

“I would be surprised if this is the start of some kind,” said Anthony Travers, professor of public policy at the London School of Economics and Political Science, adding that many companies see a niche in maintaining a base in city centres.

Others agreed, saying the HSBC Tower had a character that would attract other companies.

“It’s an iconic building across the London skyline – it’s not necessarily going away,” said Kanav Gupta, an architect working in the area. “One giant goes – there’s always something to take his place.”

One of Canary Wharf’s main bets is, in a city that has struggled with housing shortages, Al-Iskan neighborhood 23 acres Within walking distance are skyscrapers where 2,300 residences are under construction, which analysts said could help the developer hedge the impact of remote work. The group has indicated that making the area more livable is among its priorities, including adding schools and shops, as well as more green spaces and water access opportunities.

Megan Jones, 28, was among the first residents of the area’s 3,400 residents after she opened her doors to residents three years ago. At first, she said, the area was a ghost town on weekends. But music and chatter from pubs surrounded her one Friday when she went for a walk with her husband and child. “She’s definitely busier than she was,” she said. “We love it.”

Another bet is to attract companies in the streaming life sciences and healthcare sector, which have been swept up in vacant office space in North America for laboratory use. Canary Wharf executives He said Their strategy is to make the region one of Europe’s leading centers for life sciences.

biotech companies, startup companies, and government healthcare agencies have already set up camp. But Canary Wharf’s next landmark will be the 22-storey Life Sciences Building, expected to be completed in 2024, with the hope that it will create European life sciences research – an ambition shared by British elected officials, including Jeremy Hunt, Chancellor of the Exchequer.

In some ways, the long-term strategy seems to be working quite well. According to the agency that oversees Transport for London, the number of visitors to Canary Wharf during the last working week in June matched pre-pandemic levels. Over the weekend, traffic exceeded pre-pandemic levels by 181 percent.

Traffic has been greatly boosted by the opening of a new railway service, the Elizabeth Line, which connects the area to central London and Heathrow Airport. Shobi Khan, CEO of Canary Wharf Group, which To pour £150 million in development of the railway, the Elizabeth Line has been called a “game-changer”.

Office workers still dominate mid-week lunch service in restaurants, said David Janzki, general manager of Big Easy Restaurant, in Canary Wharf. “The main thing we realized after the pandemic is that Thursday is the new Friday,” he said. Weekends are still busy, he said, with some diners from outside London coming to lunch.

However, Londoners are used to seeing Canary Wharf as a hub for white-collar workers and are not yet sold on spending too much time there. Jordan Croucher, an IT worker, said that although the rest of the city was accessible, he was moving south in search of more parks and being closer to friends. He said, “I tried it, and it’s not for me.”

Gina Greenidge, 39, who was meeting up with friends after work for a drink last Friday, said Canary Wharf was a place to start the night, but not to end it. “There’s just a little bit of the human touch that still feels missing,” she said.