Jack Sidders
Mon, June 26, 2023
(Bloomberg) -- HSBC Holdings Plc’s decision to quit the 1.1 million square foot skyscraper that bears its name in Canary Wharf in favour of a smaller office in the City of London is the latest blow to the east London financial district that’s becoming a less popular choice for businesses navigating a world reshaped by the pandemic.
The desire by firms to lure staff back to the office is playing out in the shifting fortunes of London’s major office districts and is landing firmly in favor of London’s buzziest areas. In the changing office landscape, Canary Wharf is increasingly losing out to the City of London and the West End.
With the planned departure of one of its biggest tenants, questions about the future appeal of Canary Wharf are emerging even though it remains a cheaper option. While HSBC will occupy about half the amount of space in its new headquarters, rents for the best buildings in the City of London are about 50% higher than those in Canary Wharf, limiting the savings the bank will achieve from reducing its footprint.
“The appeal to employees seems now to be prevailing over the low rent,” Green Street analyst Marie Dormeuil said. “HSBC follows Clifford Chance vacating to go to the City, question marks remain for others.”
Cheaper rents and the ability to build large, highly specified modern office towers helped bring Canary Wharf to life at a time when the ancient City of London district was expensive and highly restricted. But in the three decades that have followed, wages have become a far larger cost for businesses than rent, which has scarcely changed in real terms.
The West End, home to London’s best restaurants and stores, has a vacancy rate of about 6.6%, while 9.6% of the City of London’s offices are empty, according to broker Savills Plc. By comparison, the vacancy rate in Canary Wharf is about 15%, according to Green Street.
A representative for Canary Wharf Group, which is jointly owned by Qatar and Brookfield, declined to comment.
HSBC has been looking for alternatives to its docklands skyscraper as it looks for a more flexible workspace and adapts to the post-Covid cityscape, according to a memo sent last year by the bank’s chief operating officer, John Hinshaw. HSBC said in a memo on Monday its preferred option is BT Group Plc’s former head office near St Paul’s Cathedral.
It means that the bank is moving to a building half the size that’s in the heart of the Square Mile and will feature a publicly accessible rooftop restaurant, wildflower meadow, landscaped terraces and a swimming pool. The project is scheduled for completion at the end of next year, allowing time for HSBC to fit out the offices ahead of its Canary Wharf lease expiring in 2027.
Clifford Chance LLP, the Magic Circle law firm which moved its headquarters to Canary Wharf in 2003, is swapping the docklands for the City when its lease expires in 2028. Citigroup Inc. is shrinking from two buildings to one. The future of Credit Suisse’s Canary Wharf headquarters also remains uncertain following its takeover by UBS Group AG.
“The exit by HSBC from Canary Wharf could herald further significant departures raising longer term questions about the suitability of the estate for an office-led community,” said Sue Munden, senior analyst at Bloomberg Intelligence.
Canary Wharf grew out of an initiative to revitalize the docklands industrial district on the Isle of Dogs that had fallen into decline. Prime Minister Margaret Thatcher’s government created the Docklands Development Corporation in 1981 and eventually teamed up with Canadian property tycoon Paul Reichmann to create a new financial center. Construction began in 1988 and the first banks arrived in 1991.
“In the 1990s, Canary Wharf was billed as: It will feel like Venice and work like New York, as City of London spill-over space just 5 kilometers east,” Jefferies’ analyst Mike Prew said. “It is now optimistically branded as a summer destination,” he added, citing recent advertisements for the district which owners Qatar and Brookfield are attempting to reposition.
The district has long been attempting to pivot away from banks as its dominant source of income, the peril of which was highlighted in the global financial crisis as major occupiers including Bear Stearns and Lehman Brothers disappeared. By the time the Brexit vote delivered another shock to London’s status as a financial hub in 2016 it had reduced the proportion of its rent that came from banks to less than 50%, a figure that has since fallen further.
In their place it is building rental apartments that have proved popular with overseas students and young professionals keen for high-quality buildings that are professionally managed and in a large privately owned and run estate. It is also attempting to lure life sciences companies to the area, with plans for a vast new research hub.
With the coronavirus pandemic ushering in widespread hybrid working even among financial firms, demand for offices is also evolving. Businesses are now placing more emphasis on amenities and lifestyle and less on cost, with higher rents offset by less overall square footage. That’s encouraged a series of long-term tenants to move back to more central parts of London that are easier for staff to access and offer more entertainment and eating options.
--With assistance from Harry Wilson and Tom Metcalf.
HSBC to move out of Canary Wharf headquarters due to hybrid working
The bank, which aims to move to the former head office of BT, says it wants to reduce its global office space by 40%
Mark Sweney
@marksweney
The bank, which aims to move to the former head office of BT, says it wants to reduce its global office space by 40%
Mark Sweney
@marksweney
THE GUARDIAN
Mon 26 Jun 2023
HSBC is to move out of its global headquarters in Canary Wharf after more than two decades to considerably smaller offices in the City of London, in response to post-pandemic hybrid working arrangements and a cost-cutting drive.
The financial services giant, which had up to 8,000 staff at the 45-floor tower at Canada Square during peak times before the pandemic, is to move to the former head office of telecoms company BT near St Paul’s cathedral.
HSBC, which has been based in Canary Wharf since 2002, has been examining its options since launching a review in September and will relocate before its existing lease expires in early 2027.
“We have a preferred option – Panorama St Paul’s, in the City of London,” said HSBC, in an email to staff on Monday. “We will now begin more detailed discussions on a potential lease, with the intention to move in late 2026.
“Panorama offers a modern office environment in the City, well-connected to major transport links and amenities. The building is being designed to promote wellbeing and constructed to best-in-class sustainability standards, using predominantly repurposed materials.”
In 2021, HSBC announced its intention to reduce its office space around the world by nearly 40% post-pandemic to cut costs and respond to increased hybrid working. The lender has more than 60 offices in the UK, with at least 10 in London, according to its annual report.
The new office, which is about half the size of HSBC’s east London base, was vacated by BT in 2019 as part of a multibillion-pound cost saving plan that involved shutting 20 of its 50 offices across the UK.
“HSBC’s decision to return here to the heart of the City of London is a huge vote of confidence for the City,” said Chris Hayward, the policy chair at the City of London Corporation. “This move further solidifies the City’s reputation as a prime destination for financial services firms, offering them unparalleled opportunities.”
HSBC had previously been headquartered in Poultry in the City of London, in offices dubbed the “palace of finance”, which was built in 1930.
The move by the bank, which last September announced it was reducing the space occupied in Canary Wharf by a quarter to reduce costs and cut energy use, leaves the tower’s owners with a major task to replace the long-term tenant in straitened financial conditions.
HSBC tower is owned by the Qatar Investment Authority (QIA) separately from Canary Wharf Group (CWG), which in turn is co-owned by the QIA and Canadian private equity firm Brookfield. Last month, Brookfield put the UK holiday village chain Center Parcs up for sale with a price tag of £4bn to £5bn.skip past newsletter promotion
CWG has attempted to make the area a more attractive evening destination – hosting arts, music and theatre events – after the pandemic, when great numbers of commuters opted for hybrid working hitting footfall. The group also hopes to attract new tenants to build a life sciences cluster.
HSBC temporarily withdraws mortgage deals for new borrowers
“HSBC is showing foresight by using the move to hybrid working to allow it to have a smaller, greener, more flexible headquarters that is more convenient for employees,” said Andrew Mawson, managing director of workplace consultancy AWA, whose clients include the government’s Cabinet Office and accountancy firm BDO.
“The world will become divided between enlightened employers embracing new ways of working to be more efficient and ditch expensive real estate, and the old command and control bosses mandating staff to be in the office the majority of the time whether it makes sense for them or not.”
HSBC is to move out of its global headquarters in Canary Wharf after more than two decades to considerably smaller offices in the City of London, in response to post-pandemic hybrid working arrangements and a cost-cutting drive.
The financial services giant, which had up to 8,000 staff at the 45-floor tower at Canada Square during peak times before the pandemic, is to move to the former head office of telecoms company BT near St Paul’s cathedral.
HSBC, which has been based in Canary Wharf since 2002, has been examining its options since launching a review in September and will relocate before its existing lease expires in early 2027.
“We have a preferred option – Panorama St Paul’s, in the City of London,” said HSBC, in an email to staff on Monday. “We will now begin more detailed discussions on a potential lease, with the intention to move in late 2026.
“Panorama offers a modern office environment in the City, well-connected to major transport links and amenities. The building is being designed to promote wellbeing and constructed to best-in-class sustainability standards, using predominantly repurposed materials.”
In 2021, HSBC announced its intention to reduce its office space around the world by nearly 40% post-pandemic to cut costs and respond to increased hybrid working. The lender has more than 60 offices in the UK, with at least 10 in London, according to its annual report.
The new office, which is about half the size of HSBC’s east London base, was vacated by BT in 2019 as part of a multibillion-pound cost saving plan that involved shutting 20 of its 50 offices across the UK.
“HSBC’s decision to return here to the heart of the City of London is a huge vote of confidence for the City,” said Chris Hayward, the policy chair at the City of London Corporation. “This move further solidifies the City’s reputation as a prime destination for financial services firms, offering them unparalleled opportunities.”
HSBC had previously been headquartered in Poultry in the City of London, in offices dubbed the “palace of finance”, which was built in 1930.
The move by the bank, which last September announced it was reducing the space occupied in Canary Wharf by a quarter to reduce costs and cut energy use, leaves the tower’s owners with a major task to replace the long-term tenant in straitened financial conditions.
HSBC tower is owned by the Qatar Investment Authority (QIA) separately from Canary Wharf Group (CWG), which in turn is co-owned by the QIA and Canadian private equity firm Brookfield. Last month, Brookfield put the UK holiday village chain Center Parcs up for sale with a price tag of £4bn to £5bn.skip past newsletter promotion
CWG has attempted to make the area a more attractive evening destination – hosting arts, music and theatre events – after the pandemic, when great numbers of commuters opted for hybrid working hitting footfall. The group also hopes to attract new tenants to build a life sciences cluster.
HSBC temporarily withdraws mortgage deals for new borrowers
“HSBC is showing foresight by using the move to hybrid working to allow it to have a smaller, greener, more flexible headquarters that is more convenient for employees,” said Andrew Mawson, managing director of workplace consultancy AWA, whose clients include the government’s Cabinet Office and accountancy firm BDO.
“The world will become divided between enlightened employers embracing new ways of working to be more efficient and ditch expensive real estate, and the old command and control bosses mandating staff to be in the office the majority of the time whether it makes sense for them or not.”
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