Canary Wharf vs City: the property’s mood music is becoming increasingly chaotic

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Early residents of London’s Canary Wharf in the nineties complained that they encountered more filth than business contacts there. HSBC’s plans to relocate to the city show that the Docklands redevelopment is once again out of favor compared to the Square Mile and the West End.

This change is half of a four-way split. The divide between high-quality campuses and torn-down campuses is also becoming more apparent after the pandemic.

Blame the downsizing. Businesses require less space. They are short staffed due to homework. And some are cutting headcount.

Large listed landlords such as British Land and Land Securities are relatively untouched. The valuation of their high-quality offices has fallen by almost one-tenth in the past year. The prices of low-grade complexes have dropped further.

Occupancy rates for premium locations exceed 90 percent and rents are rising at mid to high single-digit rates. Pre-leasing of new space is picking up pace.

Landlords are struggling to replace substandard stock and avoid the risk of being stuck with stressed assets. they started 3.2m square New renovation plans started in the first quarter of this year, a record since Deloitte began collecting the data in 2005.

Environmental standards drive these upgrades. The first point is that refurbishment has a lower carbon footprint than demolition and rebuilding. Energy performance is another driver. All leased sites are required to have a minimum E rating on a scale that extends to G. The minimum rating will increase to C in 2027.

So much for quality. What about location, location, location? The problem with Canary Wharf is its heavy reliance on commercial and investment banks. These are shrinking as a result of Brexit and the post-pandemic drought.

Mary Dormeuil of Green Street says this development is clearly a weak spot for London. It ranks lower in desirability and has a higher propensity to allow some tenants to work from home.

Each departure nullifies the clustering benefits of being stuck. Law firm Clifford Chance, like HSBC, is also planning to relocate as part of the downsizing. Since the pandemic, Canary Wharf has performed poorly in terms of revenue per available meter metrics. It is expected that this trend will continue.

The Lex team is interested in hearing more from readers. Please let us know in the comments section below what you think of Canary Wharf as a business location.