How times change. This week, on Monday, I was having breakfast with a friend, a well-known PR agency boss, in Delaunay on Aldwych, right in the heart of London.
We both remarked on how quiet the restaurant was. Where once Delaunay would have been full on a Monday, only half the tables were occupied. It would be much busier on the following days, we agreed, before quietening down again on Friday.
This is now the established pattern to the London working week. Work from home one or two days a week, in the office the rest of the time. What this hybrid model means in practice is that most people choose to WFH on Mondays and Fridays. The result is that once-packed streets and office buildings are eerily empty on some days.
Nowhere is this more noticeable than Canary Wharf, the specially built financial district, east of the City. Once hailed as a triumph of post-industrial redevelopment, celebrated by Margaret Thatcher when she was prime minister as a symbol of her faith in free market capitalism, its giant steel and glass towers with their massive floor plates now seem dated.
Everything about the place appears to belong to a bygone age – from the huge bank atriums to the giant trading floors, the serried ranks of lifts, the gleaming, tiled lobbies and the floors of lavishly-appointed hospitality suites and meeting rooms.
This spectacular attempt to upgrade and breathe new life into the poverty-stricken, decaying docklands was conceived long before anyone had heard of Covid-19 and WFH and meetings held remotely via Teams and Zoom.
Even so, it was risky. It was too far away from the centre, even further from the neighbourhoods where wealthy bankers, lawyers and accountants resided. Its transport links were virtually non-existent. It was easier to reach by boat along the Thames than by other means of transport.
Its first years were rocky. The development crashed in 1992, a victim of the malaise in UK commercial property. The developer, Olympia & York, bought it back and set about building Canary Wharf and selling it, hard.
Canary Wharf profited, cashing in on the post-Big Bang explosion in London investment banking, swept along in the drive that saw London become a global magnet for the industry. Towers sprang up, accessibility was vastly improved, shops and restaurants were added. Olympia & York was replaced by Canadian money manager Brookfield and the Qatari sovereign wealth fund.
All appeared fair until the onset of the pandemic. Since then, in those few short years, tastes and needs have radically altered. At first, it did not seem as though the change would last, but now there is widespread acceptance that WFH is here to say. Estate agent Knight Frank found that half of large, multinational companies are intending to reduce office space as they switch to hybrid working.
A recent report by Schroders calculated that the value of UK commercial real estate plunged by more than a fifth between June 2022 and March this year – the sharpest fall since the immediate aftermath of the Lehman Brothers collapse. That drop has been driven by WFH.
Today, employers seek smaller, more flexible spaces, without individual executive offices for the high-ups but with everyone together, regardless of seniority, sharing and hot-desking. Where once it was a mark of prestige to say your firm had moved to Canary Wharf, now it’s a sign of not keeping up, of having been left behind, of being stuck in a location that is no longer fashionable.
On top of that, Britain’s climate change commitments mean that even newish buildings require updating, for their heating systems to be replaced with something more environmentally friendly.
Some Canary Wharf residents have already seen enough. Clifford Chance, the Magic Circle law firm, is moving back nearer to the centre. Revolut is leaving. HSBC is reviewing its options.
To be fair, Canary Wharf has not stood still either. They’re keen to turn the area into a prestigious life-sciences cluster, constructing Europe’s largest research laboratory building and adding more apartments. The idea is that workers can live there as well as conduct their valuable research.
They’re anxious as well to make the shopping mall in the basement of the complex a “go to” retail and leisure destination with shoppers and visitors travelling by the much-improved rail connections, including the recently opened fast underground railway, the “Elizabeth Line”. A go-kart track has been built, alongside the increasingly popular padel tennis courts, and a section of the former dock has been turned over to open water swimming.
Try as they might, though, Canary Wharf does seem representative of a suddenly different age. That feeling of being past it is compounded by Moody’s downgrading the credit rating of its owner, the Canary Wharf Group.
Across Britain, there are many mini-Canary Wharfs. Some are on high streets, some are on the outskirts of town and city centres. While they’re not as tall and imposing as those in the East End of London, their structures are still intended to impress, designed to exploit the country’s move away from manufacturing towards a largely professional services economy. Alas, many of these schemes are now empty or emptying.
Worst hit are the developments off the main strip, in secondary areas. It’s difficult to see how they can be saved as offices, even for shared working. In some university locations, they’re being switched to student accommodation, in others to affordable housing.
Landlords have been hit by slumped demand knocking the value of their buildings, plus climbing interest rates pushing up their borrowing costs. Obtaining a loan or refinancing has become more difficult as banks have placed tighter restrictions on their lending. What debt is still available is going to cost a lot more.
London, too, is awash with luxury apartments in tower blocks. At up-and-coming Vauxhall, which has seen skyscrapers galore spring up in the recent past, there are plenty of fresh choice apartments for those seeking the high life. Canary Wharf must compete with those, and others.
These are nervous times. Whether Canary Wharf succeeds in transforming itself and prospering again remains to be seen.
