The FT and NYT have two good articles on the churn going on at London's financial hotspot of Canary Wharf. The articles point to the challenge facing the area in the aftermath of the Covid 19 pandemic-induced work from home and subsequent shifts to hybrid work arrangements and relocations to outside city centres.
The 128-acre estate in London's eastern Docklands area in Tower Hamlets borough, which arose from London's 1980s financial services boom, is jointly owned by Canadian asset manager Brookfield and Qatar Investment Authority. It houses 3500 residents and 120000 workers in 30 office buildings. This is a good summary of its history
Canary Wharf’s history as a financial district dates back to the early 1980s when Michael von Clemm, chair of Roux Restaurants but also investment bank Credit Suisse First Boston, was scouting out the area of decrepit 18th-century warehouses as a potential site for a frozen food processing plant. Von Clemm realised the district would work better as a hub for back-office financial services jobs, with the dockside offering an attractive location for shops and restaurants. It also reminded him of his native Boston, whose own 18th-century warehouses had been through a similar rejuvenation. By the time work began on the development, a host of international banks including Morgan Stanley had signed up — and Canary Wharf would no longer be a base for administrative back-office jobs but a beacon of financial power containing the European head offices and trading desks of the world’s biggest banks.
And this is about its vicissitudes,
Skeptics were once uncertain the district could survive. Formerly a deserted dockland until the 1980s when developers and businessmen saw potential for vast offices, Canary Wharf weathered a commercial real estate crash in the 1990s, the bankruptcy in 1992 of its first developers, Olympia & York, and fierce competition with London’s oldest banking district before being bought by the investment group Brookfield Property Partners and Qatar’s sovereign wealth fund in 2015... Commercial real estate values in the city have declined, but the office vacancy rate in central London was 8.4 percent in the first three months of 2023, according to the real estate subsidiary of the French bank BNP Paribas, and 17.3 percent in Canary Wharf, according to the real estate consultant Knight Frank... The Canary Wharf Group, which owns the land and about 40 percent of its development, will have to outlast the difficulties ahead. In a May report, the credit ratings firm Moody’s downgraded the debt of the Canary Wharf Group, citing the distressed market, an upcoming 1.4 billion pounds of debt refinancing and the pressure to sell assets at a discount.
However, in recent months large occupants of the area like Clifford Chance and HSBC (it's shifting its longtime headquarters with 8000 employees in late 2026) have moved out or are moving out, leaving the area with growing vacancy, and facing the pressure of having to reinvent itself.
London’s working patterns have changed dramatically, with a full five days in the office rare since the Covid-19 lockdowns. Transport for London data shows commuting volumes remain at about half their pre-pandemic levels on Mondays and Fridays, against about 70 per cent on Tuesdays, Wednesdays and Thursdays. The shift has led Canary Wharf’s banks to cut floor space. The Docklands has one of the highest office vacancy rates in London at 15.5 per cent, according to data provider CoStar.
Under chief executive Shobi Khan, it is trying to attract new tenants, including residents and start-ups, to avoid relying on the financial sector. It plans to inject more life into the area, using the surrounding water to encourage swimming and paddleboarding, while also introducing a floating basketball court. Canary Wharf is developing what it claims will be “Europe’s biggest life sciences campus”, having opened a 40,000 sq ft lab and attracted tenants including Genomics England and the Barts Health NHS Trust. The estate has also built Wood Wharf, a residential area that houses a “dog-friendly” park and residential complex where apartments can be rented for between £2,300 a month for a studio and £8,000 a month for a penthouse. The neighbourhood is surrounded by a wooden promenade on the water and includes an affordable housing project with more than 300 flats targeting residents from neighbouring areas... The district is home to more than 300 retailers as well as eight supermarkets — including the country’s largest Waitrose — more than 70 restaurants and bars, and a cinema. The Elizabeth line, which opened last year, has contributed to a 40 per cent year-on-year increase in footfall in the retail area, where occupancy stands at 97 per cent, according to the estate.
More on the ongoing adaptation in Canary Wharf from NYT
The... owners of Canary Wharf... are pivoting to re-energize it, adding more residences, building labs to lure life-sciences groups and hosting cultural shows and activities. Their vision, one that has become more crucial because of the pandemic, is to make the district a place to live, work and play — and not just for bankers. There is evidence the effort is starting to bear fruit. Now, the high-rises are full of residents who walk their dogs along the district’s waterways. Grassy areas among the office towers have transformed into makeshift outdoor cinemas, and swimmers brave the waterways between the glass buildings. Several life-science start-ups and health care companies have moved in and traffic to the Canary Wharf rail station on weekends in June is nearly twice as high as before the pandemic...One of Canary Wharf’s major bets, in a city that has struggled with an undersupply of housing, is a 23-acre housing district that is walking distance from the skyscrapers where 2,300 residences are under construction, which analysts said could help the developer hedge against the impact of remote work. The group has signaled that making the area more livable is among its priorities, including adding schools and stores, as well as more greenery and opportunities to engage with the water... Traffic has been substantially bolstered by the opening of a new rail service, the Elizabeth line, which connects the district to central London and Heathrow Airport... the Canary Wharf Group poured £150 million into the rail line’s development.
Some observations
1. London is a great example of urban renewal projects - King's Cross, London Bridge, Victoria, Paddington, Battersea, Liverpool Street, Canary Wharf, Greenwich etc. This is about Penn Station redevelopment. All of them use the metro railway station to leverage commercial office space development in the area. Large office spaces are filled up by the trains, and a service economy supports the offices. Commercial space dedicated to consumption is limited to serve the needs of those working there.
2. All these examples of renewals revolve around the services sector, mainly financial and IT services. I cannot think of a similar renewal based on manufacturing activity. Pharmaceutical R&D facilities may be an exception. Does this mean that cities are today largely centres of service activity and manufacturing is relegated to the suburbs and small towns?
3. A big failure of redevelopments like in London is the absence of residential properties. From hindsight, mixed use developments that combined residential, institutional, and commercial retail use could have been more resilient and better coped with economic and social changes. To this extent, mixed use development is a risk diversification strategy. They also enhance the liveability of the area, and prevent them from being 9 to 9 localities, where life disappears after 9 PM. It's only time before Canary Wharf's attempts to now attract residential facilities will be replicated elsewhere.
4. Given their underlying economic engines, cities are truly living organisms. Therefore recurrent renewal and regeneration is a part of their life. Old cities like London are truly remarkable in that they have been adept at reinventing themselves continually, multiple times over centuries based on the economic trends. In fact, renewal has become part of the culture of these cities. Even the older areas undergo continuous renewal while maintaining their historical features.
In contrast, in most Indian cities localities, especially the blighted areas, remain frozen in time. One possible reason worth pondering is that many Indian cities are not based on any primary economic activity and are largely parasitic and dependent on government activities (as most state capital cities are) and associated services.
5. It's critical that policy makers and developers don't see urban renewal projects as just infrastructure projects, but community development projects. These projects invariably require the revitalisation of blighted and dying areas by attracting people and businesses. This would often require significant changes to zoning regulations - land use, buildable space etc. Such gentrification also invites local opposition, thereby requiring continuous social and political engagement. It, therefore, becomes essential that these projects are led and facilitated by the local government.
6. India is missing two opportunities for rail-led urban renewal. See two posts here and here. The railway station development projects of the Indian Railways are almost exclusively railway station development projects and not renewal or redevelopment projects. These are driven exclusively by the Railway Ministry, without any meaningful engagement of the local government. Given that the railway stations are generally in areas that could do with some renewal and revitalisation, an opportunity to undertake genuine and transformative urban renewal has been missed. It's hard to imagine how they could succeed.
While the railway station development projects are detached from even the state governments, the metro railway projects are largely detached from the local governments. The metro railway entities tend to execute them as infrastructure projects, with limited engagement and ownership by the local governments, thereby missing an opportunity to integrate these new metro railway stations into the local economies and use them to drive economic transformation in the cities. I have blogged about this here and here.
7. But this community engagement also means that urban renewal projects are very risky, have a long construction and development phase, and generate returns in the aggregate only over the very long term. Such developments, even in cities like London, take a long time to become fully operational. Even after 40 years, Canary Wharf is only now bringing some parts of its real estate into use. All the required development permissions, attracting anchor inhabitants, filling up most of the large commercial spaces developed etc are fraught with political economy and commercial risks. The long-drawn nature amplifies the risks.
8. This riskiness also means that such projects have to be bespoke, requiring a combination of competitive procurement and also bilateral deal making. The deal making could involve sweeteners like tax and fee concessions, additional land etc. And the project terms are likely to get renegotiated during long construction periods either due to the inevitable delays and/or emergent unanticipated risks. The public procurement regulations come in the way of such deal making and dynamic contracting. Here too, local governments are best placed to be able to do such deal making.
It's interesting that while state governments aggressively court investors for industrial investments with very generous sweeteners, without being constrained by the competitive procurement conditions, they hesitate to engage on similar lines on urban renewal projects that have much higher economic value generation.
9. The building regulations should be flexible enough to be able to trigger the dynamic of renewal. Zoning (changes to the land-use) and building (eg. repurposing buildings for housing) regulations should be flexible enough to allow market forces to engage with renewal efforts. Further, in order to improve commercial viability such projects should benefit from higher floor area ratios, height relaxations etc.
Such flexibility is required not only for the project development phase, but to enable adaptation based on emergent economic and social trends during the long life-cycle of the project. The manner in which the developers of Canary Wharf have been able to adapt and redevelop the areas in response to the pandemic induced changes is impressive and a testament to the institutional enablers.
10. Finally, apart from strong ownership of the development by the local government, successful planning and execution of such projects require credibility and trust about the sanctity of the contract and the process. This is hard to establish without a track record.
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