London’s Canary Wharf shows how the future of work goes beyond the office

Step out of the subway station into a sprawling shopping mall, and you could be anywhere – Singapore, New York or even Toronto. Out on the street, you’re surrounded by towering skyscrapers, monuments to the area’s incredible success in attracting the world’s largest banks and law firms.

The glass facades on high-rise buildings turn everything gray and blue, befitting the suit-clad workers who call the area their own. Canary Wharf can be compared to any other financial hub in the world—stoic, utilitarian, and not for everyone.

But go a few steps further and you start to see something completely different, and for some, quite unexpected: a pleasant waterfront, rows of restaurants and clusters of modern residential towers.

This is Canary Wharf—but not as we know it.

If you ask Londoners, they will have strong (often negative) opinions about the area, making it an easy target for criticism. Some describe it as sterile and lacking in spirit compared to rival neighborhoods in London’s Square Mile and West End. Skyscrapers in the heart of Canary Wharf seem inevitable—especially for those considering living there.

Like other global hubs, Canary Wharf faces a reckoning during the COVID-19 pandemic. People went from being in the office five days a week to just a few days at most. Financial giants from Barclays to Revolut, which are the lifeblood of the Docklands estate, have had to adjust their combined operations since then. That raises questions about how well Canary Wharf is equipped for the future.

High-profile exit announcements from HSBC, Moody’s and Clifford Chance have not helped Canary Wharf’s image, plunging the story further into gloom and doom territory.

But will that be enough to crush Canary Wharf? Probably not, experts say Luck.

Commercial area reborn

To understand the future of Canary Wharf, let’s look back its past. Docklands, located in an industrial area east of London, went from being a marshland to becoming an important commercial port. Then World War II occurred in the early 20th century, turning the area into ruins after German bombing.

After years of rebuilding, the area has turned a corner. It has become a beacon of hope and a symbol of a reborn Thatcherite Britain, with its focus on financial services. First came the revolutionary (at the time) automated train line, the DLR, and then Britain’s tallest building for the next two decades, One Canada Square. But it wasn’t until the 1980s that Canary Wharf took off and gained a new name.

As financial deregulation took effect across Europe, banks needed more space to operate—and the City of London, with its historic buildings and restrictive planning laws, is simply not possible provide that. That’s when Canary Wharf became the new bank and eventually a fintech hub.

“It creates the impression that this is a success,” says Eric Van der Kleij, partner at venture capital firm EdenBase and former director of Level39, the first technology accelerator founded in Canary Wharf. The city is built for the future. Luck.

Canary Wharf is no stranger to financial turmoil. Over the years, it faced the bleakest times, such as the global financial crisis when the collapse of Lehman Brothers rocking the harbor like never before.

Then the COVID-19 pandemic left Canary Wharf’s future in fog. However, Van der Kleij said, companies moving to the area have seen nothing but “a decade of growth.”

“It’s cyclical. Now you are seeing something similar,” he added.

Paul Jayson, head of real estate at law firm DLA Piper, says the area is not comparable to other parts of London that have developed over time. Luck.

“It was created purely as an office. It has always been seen by local authorities as a central business district for office tenants, which is not the same if you go to Oxford Circus or Kings Cross, where it has been built more organically,” Jayson speak.

Back on its feet

So what impact has the pandemic had on Canary Wharf? Vacancy rates, not surprisingly, have increased. In March 2024, there are still vacancies at 15.2%—up from 13.4% a year earlier and 4% in 2017, according to commercial real estate analytics group CoStar (although so-called Class A properties managed by Canary Wharf’s main landlord had a Vacancy rates are much lower).

The rise of remote work is an entirely different matter, posing significant challenges for the commercial property market as a whole, including Canary Wharf, especially as interest rates remain high .

In 2023, CWG reported a 14.7% decrease in the value of its annual holdings, equivalent to to 1.2 billion pounds (1.5 billion USD). Even though the team’s owner got the shot 400 million pounds capital value (501 million USD), CWG’s current loans refinanced against property that is not worth what it is.

Because the scale of change is significant, Van der Kleij suggests radically rethinking the way office space is managed.

“Real estate needs to embrace Uber equivalent to increasing prices. If they want to fill the space they are paying rent on on off days, everything from meeting rooms needs to be priced according to demand,” Van der Kleij said. “This is nothing new. This is basic economics.”

“Real estate needs to embrace Uber equivalent to increasing prices”

– Eric Van der Kleij

These days, Londoners spend fewer days a week in the office, usually Tuesdays, Wednesdays and Thursdays, affectionately known by locals as “TWaTs”. That shift, Jayson argues, has created a need for buildings that can accommodate employee flexibility and accommodate in-person and virtual collaboration—and give Canary Wharf an advantage.

“Buildings designed in the 90s, even the early 2000s, do not have that ability. That’s where we see the benefits of Canary Wharf,” he said.

Besides its 9 to 5 activity, Canary Wharf has also attracted big-name retail and food and drink establishments, including Hawksmoor and Gaucho, around newly established residential areas such as Wood Wharf to promote Encourage new generations of residents to live. And work there.

According to CWG data, the gamble appears to have paid off with retail capacity as well as visitor numbers reaching a record high in 2022. The opening of the new Elizabeth line at Canary Wharf last year was significant collide footfall and is expected to continue to attract workers as well as leisure visitors.

For future tenants, team hope that relatively new entrants to the life sciences and healthcare sector, such as Genomics England and Barts Health NHS Trust will strengthen their position in the coming years. Some of Docklands’ loyal tenants, such as Morgan Stanley and other professional services firms, have renewed their commitment to continue operating, giving the sector a much-needed vote of confidence.

CWG declined to comment further on future plans to adapt to the changing ecosystem.

While all the foundations have been laid for Docklands’ transition, it won’t be a quick leap from adolescence to adulthood.

“It [Canary Wharf] are becoming adults. It has gone from a well-funded, luxury office destination to a seven-day-a-week mixed-use residential hotspot—and that will take time,” Jayson said.

Firstly, shedding the dry, dull impression of the area that some Londoners love to hate may take longer to resolve.

But history shows us the story of Canary Wharf is one of resilience. Just like the countless businesses and residents who call this place home, it is not afraid to innovate, adapt and grow in a rapidly changing world.