Canary Wharf claims high ground on City:
Downriver site on verge of being biggest banking community in Europe
Canary Wharf will finally come of age over the next two months when the UK’s “new” financial centre overtakes the traditional City of London as the biggest employer of bankers in Europe.
According to Financial Times research, the transfer of 8,000 jobs by US bank JPMorgan from various sites around the Square Mile to the group’s new European headquarters at 25 Bank Street will finally tip the balance of power three miles eastwards down the Thames.
JPMorgan is currently mid-way through the process of moving staff from the City to its new 33-floor Canary Wharf tower block, formerly the headquarters of Lehman Brothers in Europe. Once that transfer is complete in July, the 16 biggest banks in the UK will together employ 44,500 bankers in Canary Wharf, compared with 43,300 in the City.
More banks – 10 of the 16 – still have their main offices in the City. But the biggest employers – and the biggest HQs – are now in Canary Wharf.
HSBC and Barclays are both headquartered there, as is Credit Suisse’s investment banking operation. JPMorgan will join fellow US banks Citigroup and Morgan Stanley.
While the City’s predominantly period or “low-rise” architecture restricts the number of staff that can be housed in the district, forcing them to occupy multiple buildings, Canary Wharf boasts a cluster of high-rise blocks in the shadow of One Canada Square, the pyramid-topped 1991 block that for many years stood as a lone beacon for the area and was the tallest building in Europe.
Bank bosses say the economics of rents that are a third cheaper and the availability of large buildings that can accommodate several thousand people under one roof will continue to drive the shift.
But moving there is often unpopular with staff, despite the emergence of new shops, bars and restaurants in the area. “There is life in Canary Wharf but it’s a pretty sterile life,” said one senior banker.
Canary Wharf was created over several fitful years under the last Conservative government in the 1980s and 1990s, when land freed up by the closure of the West India Docks was redeveloped. The first tower blocks were completed in 1991 but only over the past five to 10 years has the area become a magnet for the banking industry.
The balance of bankers in London is likely to shift further towards Canary Wharf in the coming months as several City-based banks, such as Royal Bank of Scotland and UBS, are set to cut staff.
High-rise Docklands loom over historic rival
It has been a long time coming. But more than 20 years after Canary Wharf’s first tower blocks sprang up, the district has finally sucked the majority of bankers out of the City of London, the UK’s financial heart.
An FT analysis of the 16 major banks with a significant presence in either the City or Canary Wharf shows that once JPMorgan has moved 8,000 of its 11,000 London employees into its new 25 Bank Street European headquarters in July, the balance of bankers will have moved to “The Wharf”.
Excluded are a number of smaller banks and boutique advisory firms in both locations, as well as the legion of other financial services companies that populate each district. But for big banks, the trend is obvious - Canary Wharf is becoming an increasingly powerful magnet.
In pure cost terms the argument for relocating is clear cut. Annual average rents for so-called prime office space are running at £36 per sq ft in Canary Wharf, compared with £55 per sq ft in the City. The Canary Wharf figure is up from from £20 in 1990, while rates in the City are unchanged on two decades ago. But the gap in price is still cited by many in the property industry as the biggest threat to the City’s ability to attract tenants in future.
“When you are buying a few hundred thousand square feet at a time, that gap in price makes a huge difference to the cost of running your business,” says Michael Marx, chief executive of Development Securities, the property investment company.
Aside from the financial attractions, banks are drawn to Canary Wharf because of the style of buildings on offer.
Tower blocks provide the flexibility to expand rapidly without relocating, while large, open-plan floor plates are well suited for trading rooms. By contrast, the City is dominated by smaller, often multi-tenanted office blocks which offer little opportunity for expansion.
However, those charged with preserving the City’s role as the UK’s pre-eminent financial centre insist there is room for both business districts.
Peter Rees, the City of London planning officer, explains that London needed Canary Wharf during the 1990s to accommodate the rapid expansion of the financial services sector.
“It is just like London built Croydon as a satellite town to take up the overspill in the 70s,” says Mr Rees.
“Canary Wharf is good for the US model of banks, which want 1m sq ft and their workers to be in the building all day, so need a big canteen and a gym. For me, though, the best thing for business is to have workers out picking up gossip. I think of the City like a collection of beehives on a compost heap - bankers have to come out to cross-pollinate from time to time,” Mr Rees adds.
So far, despite sharp job cuts at most banks amid the ongoing financial crisis, there is little sign of a fall-off in demand for ever bigger headquarters. And despite some relaxation in the City’s attitude to tower block construction, it is Canary Wharf’s building schedule of ever higher towers that looks set to dominate the supply.
Against the steady flow of banks shifting staff from the City of London to Canary Wharf, one has swum in the opposite direction. Nomura, the Japanese bank that was the last occupant of JPMorgan’s new Canary Wharf headquarters after it bought the defunct Lehman Brothers franchise, moved into a slick Square Mile riverside building last year. There were several reasons but one important one was staff demand to be back in that “beehive” atmosphere. “I was hugely relieved,” says a senior executive. “There’s a degree of inhumanity in Canary Wharf. One of the joys of the City is the mix of streets, the different people, the independent shops.”
Other bankers who have been reluctantly displaced to Canary Wharf say they have had to maintain “outpost” office facilities in the City or West End in order to meet clients who refuse to travel so far east.
Nevertheless, most property experts reckon the future of the City will lie increasingly with non-banks, and even with companies that have nothing to do with financial services.
A spate of recent deals, including Blackstone’s £340m acquisition of Devonshire Square in Bishopsgate last week, have involved companies wanting to take over existing office space and re-brand it to suit a new generation of migrants to the City, such as smaller technology and media companies.
“I hope the new skyscrapers in the City do not attract big banks,” Mr Rees says. “We want them to be multi-tenanted buildings which can take in some of the demand pushing in from the creative companies.”