For more than two decades, 8 Canada Square, the London skyscraper that houses HSBC’s global headquarters and bears its logo, has been a symbol of Canary Wharf’s status as a global financial centre.
But the bank’s decision to ditch the city’s east-end Docklands in favour of a more central location reflects the business district’s waning allure to finance companies after a transformative shift in working habits.
“It is another blow to a part of London that has been hit disproportionately hard since the pandemic began,” said Mark Stansfield, senior director at commercial real estate data provider CoStar. “Many of the large banks based here are cutting their office footprints.”
With the future of another landmark tenant, Credit Suisse, in flux following its near collapse and rescue by rival UBS this year, Canary Wharf’s reputation as a hub for global banking has been cast into doubt.
The tower-strewn neighbourhood, developed in the wake of Margaret Thatcher’s 1986 Big Bang financial reforms, has often battled with a perception of being too sterile and far removed from London’s more vibrant areas. Now more desirable districts in the capital are competing on office space as demand for large buildings dwindles.
HSBC told staff on Monday that it expected to leave Canary Wharf in late 2026, preferably for Panorama St Paul’s in the City of London, a building that was formerly an office for telecoms group BT.
Several other banks, such as Barclays, Citigroup and Société Générale, have been consolidating their operations in Canary Wharf, closing ancillary offices and subletting floors.
Marcus Phayre-Mudge, a property fund manager at Columbia Threadneedle, said Canary Wharf’s woes were in part the result of its historic over-dependence on financial services tenants. Big banks’ space requirements have declined since the area was developed during the 1980s boom of computer trading.
They have since adopted new technology and flatter screens, while bankers who typically work long hours have embraced the remote working practices that became the norm during the pandemic. By contrast, central areas such as the West End are home to more diverse sectors such as tech, retail and fashion.
More than 1mn square feet of extra space have become available on the market in the Docklands area since the pandemic struck, according to CoStar. Analysts say the London office space market has split, with strong demand for top-tier buildings that boast sustainable credentials and slumping interest for others.
“Lots of firms are downsizing so the City is more attractive,” said Capital Economics senior economist Matthew Pointon, highlighting the historic financial district’s better transport links and proximity to cultural institutions and restaurants. “If you’re downsizing you probably get more valuable space in the City.”
Some expect HSBC’s departure to trigger a wider exodus that will benefit central London’s property sector.
James Neville, a partner at property consultancy Allsop, said HSBC’s decision was “fantastic” news for central London developers. He expects more companies to snap up “pre-lets” at a premium, with supply for top-tier central buildings still tight.
The Docklands has one of the highest office vacancy rates in London at 15.5 per cent, according to CoStar, against as little as 3 per cent in some parts of the West End and a central London average of 9 per cent.
Credit Suisse was one of the first big banks to move to Canary Wharf, taking up the 21-storey One Cabot Square building in 1991. The building underwent an expensive revamp just before Covid hit, with executive floors spruced up.
But successive rounds of job cuts at the bank in recent years have meant many of the floors are currently unused. Executives at the bank had already begun reassessing its global property footprint, including Cabot Square, before its rescue by rival UBS. The takeover, which completed this month, is expected to lead to thousands of job cuts in London, with possible implications for its future in Canary Wharf.
French lender SocGen is another bank that invested heavily in its Canary Wharf UK headquarters when it moved into seven floors of the 27-storey One Bank Street skyscraper in 2019, but the bank has since sublet some of the space in response to an increase in homeworking.
Barclays last year moved its investment banking staff out of 5 North Colonnade — one of two buildings it occupied in Canary Wharf — and consolidated its workforce in One Churchill Place, the 32-storey skyscraper that was opened in 2005.
Citigroup is also in the process of bringing all its 10,500 Canary Wharf staff under one roof. The Wall Street lender bought the 200-metre high, 42-storey tower at 25 Canada Square for £1.2bn in 2019 as part of a global strategy to own, not rent, its major office buildings to save costs.
The bank’s global hybrid working policy — where staff can work up to two days from home — has meant it will no longer require its two other Canary Wharf offices after the refurbishment is complete, which is expected to be in 2025.
Citigroup’s investment in refitting 25 Canada Square was seen as an endorsement of the area, as was Morgan Stanley’s decision to commit to its office after it scouted around for alternative potential bases over the past two years.
In a further sign of support for the Docklands, the European Bank for Reconstruction and Development relocated staff in the Square Mile to the top 13 floors it has leased in the 26-storey Five Bank Street.
Rating agency Moody’s downgraded the debt of Canary Wharf Investment Holdings in May citing a “difficult operating and funding environment for real estate companies”. Its report also cited Canary Wharf’s £1.4bn of debt that needs to be refinanced in 2024 and 2025 as a contributing factor in the downgrade.
Clifford Chance, the last major law firm in Canary Wharf, is set to move in 2028 to a “net zero carbon” City of London office in Aldermanbury Square, to the north-east of St Paul’s Cathedral, that is less than half the size of its current home.
Both Clifford Chance and HSBC said sustainability had been a strong pull factor in their decision to move to new buildings, while analysts say companies are looking to take advantage of the end of their leases to find more energy-efficient buildings that can help them meet their net zero commitments.
“A lot of [the Canary Wharf] towers were built 15, 20 years ago,” said Phayre-Mudge. “They are well maintained but there are of course new ways of heating and cooling which were not used back then.”
Canary Wharf was also recently hit by a high-profile insolvency after 5 Churchill Place, a 12-storey building owned by Chinese property developer Cheung Kei Group that was once home to Bear Stearns, collapsed into administration last month.
Canary Wharf Group was bought in 2015 by Canadian private equity firm Brookfield and the Qatar Investment Authority in a £2.6bn deal and has sought to reduce its dependence on financial services tenants under their ownership.
The group has committed to building what it claims will be “Europe’s biggest life sciences campus” on the estate, having attracted tenants such as Genomics England, the Barts Health NHS Trust and start-ups in the sector. It also opened a 40,000 sq ft life science lab.
The area’s residential offering has also grown in recent years, with more than 3,500 people now living on the estate, compared with none three years ago. The company is developing an affordable housing scheme for people who earn less than £60,000 a year, as well as infrastructure including a school to service the residential community.
At the end of 2022, 54 per cent of the estate’s tenants were linked to financial services, according to Canary Wharf’s annual report. “Wherever possible steps are still taken to mitigate or avoid material consequences from this concentration,” the report said.
But given the industry’s dominance of the area, shifting to a substantively different occupancy mix will be tricky.
“What is going to happen to Canary Wharf is the conversation everybody’s been having,” said Neville. “There are other avenues [than office space] they are having to look at but with the sheer size of the space that’s going to be a challenge.”
