“It’s not happening.” This is the blunt assessment of the success of efforts to turn Canary Wharf into a shopping and leisure destination. “Mondays and Fridays are dead,” says the frank shop worker. “This shop used to take a fair bit before Covid but now everything’s changed.”
It’s a verdict that appears to be shared by other tenants in the vast east London financial hub. HSBC’s decision to leave its “tower of doom” in the docklands and move back to the City of London after more than two decades has dealt a hammer blow to Canary Wharf’s standing as a global financial centre.
The move has left onlookers examining landlord Canary Wharf Group (CWG)’s plans to raise the appeal of the former wasteland, at a time when hybrid working has reduced the throng of office workers descending on the area each day.
HSBC will ditch its 45-floor skyscraper at 8 Canada Square when the lease expires in 2027 and move to an office near St Paul’s Cathedral that’s roughly half the size, following in the footsteps of other companies such as the law firm Clifford Chance.
The decision says a lot about demand for office space post-pandemic, and the “sterile” perception of Canary Wharf that the developer’s management is desperately trying to shake off. It has added shops, bars and restaurants in recent years, landscaped the areas between its glass-and-steel towers and created a public art trail, which it says is London’s largest collection of outdoor public art. Over the summer, there are free events aimed at families such as open-air movie screenings and a music and theatre festival.
Office worker numbers have dwindled since the Covid pandemic, even though several US banks including JP Morgan have ordered their staff back to the office for all or most of the week. Other financial firms are more relaxed about working from home, such as Lloyds Banking Group. This means many staff only go into work between Tuesday and Thursday.
While the City is also affected, Canary Wharf – owing to its less central location in a loop of the Thames known as the Isle of Dogs – has to work harder to attract firms and visitors. To reduce its reliance on financial services, it wants to build a life sciences hub, and is courting technology and media companies as well as charities.
The early vision
Since Margaret Thatcher’s big bang financial reforms of the 1980s, east London’s docklands have been transformed from a wasteland with derelict warehouses into a cluster of gleaming skyscrapers teeming with bankers and lawyers. Canary Wharf takes its name from the quay where fruit and veg from the Canary Islands were unloaded.
In 1981, Thatcher’s government established the London Docklands Development Corporation to rebuild the area, and enlisted the Canadian property tycoon Paul Reichmann. By the time the first tower, the pyramid-topped One Canada Square, rose out of the docks in 1990, Thatcher had been ousted, and two years later the Canadian developer filed for bankruptcy.
CWG, today owned by Canada’s Brookfield Property Partners and the Qatar Investment Authority, later took up the baton and turned 52 hectares (128 acres) of wasteland into a financial hub. It has been built despite opposition from locals – the estate is in one of London’s poorest boroughs, Tower Hamlets.
An evening ghost town
Despite CWG’s repeated attempts to bring a buzz to the area throughout the week by introducing open water swimming, paddleboarding and go karting, some shops and food sellers still operate reduced hours or don’t open at weekends.
Evenings tend to be quiet too. “The last hour is a bit strange when it gets to between 7pm and 8pm,” says one shop worker at an upmarket beauty brand. She adds that quite a few people only come into the shop because they are lost and want directions. The meandering, underground mall built around Canary Wharf station feels pretty soulless. More outdoor space would help, she says.
Her colleague chips in: “If you don’t work here, then why would you come here? There are shopping centres all over London.”
Mianika Sikabofori, senior sales assistant at shirt retailer Charles Tyrwitt, is more upbeat. “The store really picked up this summer. At the weekend, we get groups of people who are looking to buy something for an event, like Ascot,” she says.
In recent months, Church’s Shoes and Ted Baker have shut stores in the mall, replaced by other brands.
CWG insists that 97% of its shops are occupied by tenants, but declines to disclose the occupancy rate for its offices.
About 15.5% of Canary Wharf offices are empty, compared with 11% in the City, according to commercial real estate firm CoStar. In the West End it is even lower at 6.6%, according to property firm Savills.
With the rise of hybrid working, and more automation on the trading floor, Barclays and Citigroup are both shrinking from two buildings to one in Canary Wharf.
The future of Credit Suisse’s Canary Wharf offices are also in doubt as job cuts loom after its takeover by UBS. The law firm Clifford Chance decided last autumn to return to the Square Mile to an office half the size of its current one in Canary Wharf. It will be paying £77 a square foot in rent, which is thought to be similar to HSBC’s new rent.
CWG is trying to lure firms with cheaper rents – which average about £50 per sq ft, compared with £72.50 per sq ft in the City. But firms like HSBC can easily afford to pay a higher rate if they are downsizing at the same time.
“It’s all about the vibrancy of an area that outweighs even the prime amenities that are on offer in a good building,” says Marie Dormeuil, European office analyst at Green Street Advisors.
“It’s a recurring theme. The City or a more central location within London fare slightly better than Canary Wharf. It still has quite a few things on offer and it’s not a dead area, but from an office perspective, it has certainly lost its appeal and what made it.”
She says Canary Wharf – equivalent to almost a 10th of London’s 22m square metre office market – is most at risk in the capital, as its office buildings typically offer large floorplates, mainly let to banking, legal and tech-oriented tenants that have now embraced hybrid working.
The credit agency Moody’s cut CWG’s rating to junk last month, citing a “difficult operating and funding environment”.
Travel into the docklands
Commuter levels at Canary Wharf tube station are at 70% of pre-pandemic levels at about 325,000 exits a week. But the area’s transport links have vastly improved with the arrival of the Elizabeth line, which whizzes people from Bond Street in central London to Canary Wharf in about 15 minutes.
The Elizabeth line station in Canary Wharf is seeing 148,000 exits a week and the combined figures show that the number of people travelling to Canary Wharf is now higher than it was before the pandemic, according to Transport for London.
London City airport has also bounced back and is back in profit. About 3 million passengers used the airport in 2022 but the number remained below the 5.1 million recorded in 2019.
What next?
While three-quarters of the estate is offices and nearly a fifth shops and restaurants, CWG is also building some apartment blocks, comprising 3,900 homes. More than 3,500 people are living on the estate, where there were none three years ago.
Canary Wharf has been compared to the La Défense business district in the north of Paris, which has a similar office vacancy rate of 16%, but Dormeuil says: “Canary Wharf is much more thriving than La Défense. It has a lot more to offer to its local residents.”
Finally, CWG has ambitions to build a major life sciences cluster to rival those in Oxford and Cambridge. It has managed to attract the UK health regulator and Genomics England, while the European Medicines Agency departed following Brexit. A 750,000 sq ft commercial laboratory building, supposedly the largest in Europe, is also in the works and the developer hopes to lure small biotech firms. CWG will hope the health specialists can help to breathe new life into the area.
• This article was amended on 5 July 2023 to remove an incorrect statement in a quote that “no one lives in” the La Défense business district in Paris.
