The high rise and fall of Canary Wharf

Steve Y found Canary Wharf oddly familiar when he first moved from China this year to an apartment in London’s high-rise business district near his new job at JPMorgan.

“It’s quite similar to the financial district in Shanghai,” he said. “Tall buildings, modern vibe, impatient people rushing to work and back.”

But the junior banker is looking to move out to a place that reminds him less of home — or his job. “It’s convenient but my personal life gets mixed up with work,” he said. “I can’t have a pure social life.”

He is one of about 3,500 residents and 120,000 office workers in Canary Wharf, a 128-acre estate in London’s eastern Docklands area that is jointly owned by Canadian asset manager Brookfield and the Qatar Investment Authority.

The district, which sprung out of London’s 1980s financial services boom to house big banks’ expanding trading floors, is now under pressure to reinvent itself as companies downsize their office space to adapt to hybrid working.

Home to 30 office buildings, the area has been hit by high-profile exits in recent years, including law firm Clifford Chance and now HSBC, which this week said it would move its global headquarters out of the Canary Wharf tower that bears its logo to smaller premises in the City of London.

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.

“There is a big exodus coming from Canary Wharf at the moment,” said Richard Fleming, managing director at consultancy Alvarez & Marsal, which is working on the restructuring of a 12-storey tower in the district that collapsed into insolvency this month. “Bankers are working from home much more these days. Canary Wharf is one of those places that is just being pulverised.”

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European financial districts such as Canary Wharf and La Défense in Paris were developed in the 1980s and 1990s to compete with North American central business districts.

“They embody the ‘agglomeration effect’, this idea that as businesses cluster together and share infrastructure, access to knowledge, clients and competitors, they become more productive,” said Valentine Quinio, senior analyst at urban policy think-tank the Centre for Cities.

Quinio said the business district model was not under existential threat but that such areas were more “vulnerable” to changing ways of working than other neighbourhoods.

New energy efficiency requirements for commercial leases may add to the pull away from the Docklands, with rival areas such as the City of London further ahead in upgrading its office stock than Tower Hamlets, the borough that includes Canary Wharf.

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.

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It captured the imagination of Margaret Thatcher’s government, which was in the process of internationalising the staid City of London’s financial institutions as part of the “Big Bang” financial reforms.

Canary Wharf had been one of the busiest docks in the world throughout the 19th century, but after a period of decline, they closed in 1980.

The Long Good Friday, a film centred on a British gangster who schemed to launder money through developing the Docklands, came out the same year. Life imitated art, according to gangland folklore, with much of the proceeds of the infamous Brink’s-Mat gold robbery of 1983 rumoured to have been funnelled into the Docklands redevelopment.

One worker whose company is set to move from Canary Wharf to the City said she would miss having her own office, storage space for cars and bikes and perks such as a huge canteen and on-site gym. But she welcomed the move nonetheless.

“You’re basically underground for the whole time [in Canary Wharf],” she said, in reference to the subterranean shopping centres where office workers spend their winter lunch breaks. “It’s far from where I live and basically it’s a soulless, horrible place with no character — that’s why I hate it.”

Many see central London locations as livelier alternatives that attract a more diverse crowd and where bankers, lawyers and accountants can be closer to their clients.

Canary Wharf “is just a place to work — everybody is wearing a shirt”, said one Barclays employee. “After-work drinks are more lively in the City, there’s no real pubs around here.”

The private estate has fought against this perception. 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.

Marcus Phayre-Mudge, fund manager at TR Property Investment Trust, said Canary Wharf was right to increase its residential offering, pointing to good transport links thanks in part to the newly opened Elizabeth line railway, its green space and its proximity to water.

“The only time I leave Canary Wharf today is to go to the airport to fly,” said Daniel Kemdeng, who rents a flat on Wood Wharf and works down the road at JPMorgan. “We really have everything on site.”

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.

However, analysts warn such amenities are a byproduct of the concentration of offices and could vanish with them.

“Canary Wharf is first and foremost a place for work and production as opposed to a place for consumption,” said Quinio of Centre for Cities. “Commercial space dedicated to consumption is only there to serve the needs of people who work there.”

“Even the shops are work,” said Dave Page, chief executive at Actual Experience, a listed technology company. “The food here is made to be taken away to your desk, everything about it feels like work.”

Despite the corporate feel, some enjoy spending leisure time in the corporate quarter, which they find safe and clean. The privately managed estate has about 100 security staff on duty around the clock and 2,500 security cameras across the estate.

Tower Hamlets is London’s poorest borough and the neighbourhoods immediately to the north of Canary Wharf are among the most deprived in the capital.

Claire Harding, interim chief executive of the Centre for London, said benefits to the local area were visible in the abundance of high-quality play parks in Tower Hamlets, as well as the number of corporate social responsibility programmes from banks and law firms offering children in neighbouring areas maths training and work experience.

Tower Hamlets has coped much better than other London boroughs from cuts to local government funding because of the investment it negotiates from Canary Wharf developers. But Harding warned it had become too reliant on the continual growth of the district.

“If development isn’t happening, how will they continue to pay for that local investment?” she asked. “You can no longer go round to developers and big business and say, ‘cough up’.”

Patrick Diamond, professor of public policy at Queen Mary University of London and a former head of policy planning at 10 Downing Street, said Canary Wharf was still seen as inaccessible to local people and the lack of public facilities in the development plans was unlikely to change that perception.

“You have areas that are incredibly close together but with a massive difference in wealth creation, housing quality and skills levels,” he said.

“Could that inequality be broken down? It could, but you’d have to go a lot further than what is currently planned. And as we see with HSBC moving on, those opportunities might not be around forever.”

Additional reporting by Chris Campbell and Patrick Mathurin