City office space under threat as personified by Canary Wharf exodus

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The pattern of office working is changing and nowhere is its effect on commercial property being felt more strongly than in London’s Docklands’ Canary Wharf.

A once thriving financial centre

The development of the wharf into a thriving financial centre just outside the City of London breathed new life into a run-down legacy of the days when London was a major shipping port, transforming the once poverty-stricken location.

The transformation was the brainchild of international developers and was conceived well before anyone had even thought the world would be turned upside down by a major pandemic. The resulting shift in the way people adapted to it – using technology to enable working from home (WFH) with Teams and Zoom conducting business meetings and customer services remotely – has hit commercial office occupancy rates hard.

These dockside property developments were risky even in the 1980s, that was until a critical mass of financial institutions started to move into the shiny glass towners at the Wharf. It was initially too cut-off from the London business and financial centre, too far away from where the wealthy bankers, lawyers and accountants traditionally did business. But this changed later as transport links were improved and these services moved in.

Property crash of the 1990s

The development came down with a mighty crash in a commercial property crisis of 1992 but the Canadian developer, Olympia & York, bought it back from the ashes and set about selling the office development idea hard. With new transport links including the Docklands Light Railway, a new tube station, boat transport access and an a city airport, and the project developed a momentum of its own.

It was hailed as a triumph of London’s post-industrial world, a child of Margaret Thatcher’s city revolution. The giant steel and glass towers were taken up by the leading banks and city institutions, while every day, hordes of workers used the gleaming new transport links to fill the massive floor plates of these symbols of London’s financial success.

WFH establishes a pattern

Today, post-Covid, it’s all looking a tad different. What looks like becoming a newly established pattern of office working, the WFH hybrid model, has changed all the success that went before. The working week for capitals around the world has become one of work at home for one, two or even three days, while the balance is spent in the office.

You don’t have to be a property genius to see that the effect of this is to dramatically reduce the space these great financial institutions need to operate their businesses in. Surveys show that to date, London has been one of the centres most affected by WFH.

People are commonly staying home Mondays and Fridays and travelling into work in between. The result is the once packed-to-overcrowding transport links are now under used for much of the time and the service infrastructure of retail outlets for workers, the coffee shops and the restaurants, the clothing and footwear stores, are all suffering substantially.

At first people were sceptical that WFH would not last, that people would gradually drift back to their commuter schedules, back to their offices lives full-time after Covid subsided, and all would be back to normal. That this did not happen has surprised many and left commercial property owners licking their wounds and wondering how to adapt.

Reduced demand for space

A study by estate agent Knight Frank and another by international management consultants McKinsey and Co, find that at lease 50 per cent of all large, multinational companies are planning to reduce their office space as their workforces’ needs and preferences have altered radically in a matter of a couple of years.

The result is a dramatic reappraisal of the values of commercial properties in most major cities around the developed world. Schroders Investment Management claims that the value of UK commercial office property has lost over 20 per cent of its value since June 2022, driven it says by the WFH trend.

The employers of today, in a post-pandemic world, are likely to be looking for smaller, more flexible spaces. Open plan will be the order of the day with everyone, including senior staff, working closely together, and in many cases sharing desks and meeting spaces. In a world of mobile working, an office full of staff every day may be a thing of the past.

Once a mark of prestige to have an office location in Canary Wharf, it could become a sign of being left behind, out on a limb and stuck in a location that is becoming no longer fashionable? That’s the danger for Canary Wharf.

Valuation downgrades

The Canary Wharf Group, owned by Qatar’s sovereign wealth fund and Brookfield Asset Management, has had the embarrassment of recently being downgraded by Moody’s the international business analysis and credit ratings agency, noting that the company would in future have difficulty in filling and ultimately selling its offices “without offering substantial discounts”.

The exodus

What’s more, Moody’s itself looks like it might join the Canary Wharf exit. There it currently has around 1200 employees and is said to be seeking to reduce its current footprint of 170,000 sq ft., though it declined The Daily Telegraph’s request for comment on its office plans.

The Moody’s threat to depart comes after major blow to the centre as one of the most visible iconic buildings, HSBC’s glass tower, will be vacated as the Bank announced that in 2027 it will abandon its Docklands tower for one back in the City of London.

The 45-storey HSBC skyscraper will move its staff base to a smaller office at the former BT head office near St Paul’s, while “Magic Circle” law firm Clifford Chance last year also announced it was leaving the Docklands for the City of London. In addition, Barclays has sublet 500,000 sq ft of space at its Canary Wharf offices.

Credit Suisse is another bank trying to sub-let empty space at its Canary Wharf headquarters.

The effort to adapt

The Canary Wharf Group also declined to comment on its plans, but it is rumoured that it is now attempting to reinvent itself as a home for life sciences as it seems there’s a chronic shortage of suitable laboratory space.

Efforts to turn the location into a shopping and leisure destination appear to be struggling as one shop worker told The Guardian: “Mondays and Fridays are dead. This shop used to take a fair bit before Covid but now everything’s changed.”

Despite the Group’s efforts, adding shops, bars and restaurants over recent years, landscaping between its glass-and-steel towers, creating a public art trail, and free events aimed at families, it is struggling to shake off the wharf’s sterile and chilly atmosphere.

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Looming EPC changes already skewing the buy-to-let market, claims finance boss

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The Government’s plans to force landlords to upgrade their properties to a minimum ‘C’ energy efficiency standard is already affecting how rental properties are being purchased, the boss of a big money firm has claimed.

Louisa Sedgwick, Commercial Director at Paragon Bank (main picture), says her firm’s poll of some 1,200 landlords has revealed that a quarter have already sought rental properties to purchase only if they already meet the likely minimum MEES certificate due to be introduced or require some work to get them to reach it.

Also, nearly two thirds of landlords said they would factor in the new EPC rules when buying future homes to rent.

Under the Government proposals, new rental tenancies will require a minimum EPC of C by April 2025, with all tenancies meeting that standard by 2028.

Two years

But it is over two years since the proposals were announced and Michael Gove, Secretary of State for Levelling Up, Housing and Communities has recently hinted that their implementation will be delayed.

Nevertheless, Paragon says the proposals are influencing landlords’ business strategies more broadly with nearly two thirds having taken some form of action as a result.

This includes 20% having already made improvements to bring a property’s EPC rating up to C or above while a similar proportion are in the process of retrofitting their properties with energy-saving measures to increase the EPC rating to C or above.

Upgrade work

Approximately 10% of landlords said they had sold properties rather than pay for upgrade work while 7% said their properties would never make a ‘C’ certificate.

“Michael Gove’s recent comments mean it’s looking increasingly likely that any new PRS energy efficiency standards will be delayed,” says Sedgwick.

“Nevertheless, it’s encouraging to see landlords are already building on the progress made over the last decade in making privately rented homes more sustainable.” 

View Full Article: Looming EPC changes already skewing the buy-to-let market, claims finance boss

Buildings insurance increases 70% since last year?

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Hi all, I have a 2 bed maisonette in blocks of 4, there are 5 blocks in total.

The Managing Agents have sent the invoices for the ground rent/buildings Insurance to each leaseholder in the blocks (20 in total) which represents 1:20th of the alleged policy premium.

View Full Article: Buildings insurance increases 70% since last year?

BREAKING: Gove green lights expensive new licencing scheme in Nottingham

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Michael Gove has given Nottingham city council the green light to proceed with one of the UK’s most expensive and controversial selective licensing schemes.

Due to start on December 1^st, it will require all rented properties within 20 of its wards to be licenced and has been voted through despite vociferous opposition from local landlords, as LandlordZONE has reported in recent months, including how both the NRLA and EMPO have slammed the scheme.

Some 30,000 properties will be covered by the new rules which, although it is slightly smaller than the previous one that expires today, remains large enough to need Secretary of State approval.

The council has justified the move by claiming it will give private tenants “better quality accommodation and management as well as protection from bad landlords”, a council statement says.

“Tenants will also know what is expected of their landlord in terms of the maintenance, safety and management of their home.

“It will be introduced into areas of the city where the council has gathered evidence of poorer property conditions.

“Landlords of private rented properties in certain parts of the city will soon have to meet a set of conditions and ensure good management of their properties.”

Bad form

The council appears to have listened to some landlords concerns, saying it is simplifying the labyrinthine form landlords and agents were forced to use when applying for the previous scheme, which ran from 2018 until now.

Landlords with licences under that scheme will not need to apply for a new one until their existing one runs out, while those with properties covered by the scheme for the first time will need to apply after September 1^st.

Its higher fees, which have been described by the NRLA as a ‘tax on landlords’ will be £1,118 over five years for non-accredited’ landlords – with accredited ones paying a lower fee.

‘Accredited’ means  landlords who have Nottingham Rental Standard Accreditation via DASH or Unipol.

Councillor Jay Hayes (pictured), the City Council’s Portfolio Holder for Housing, says: “Having a licence will allow landlords to demonstrate that they provide decent quality accommodation for tenants, and we will work with landlords to support them to achieve the licence conditions.

“We believe the scheme will improve the reputation of private landlords, as well as Nottingham’s reputation for providing quality housing.”

Read a full list of the wards covered or partly covered by the scheme.

View Full Article: BREAKING: Gove green lights expensive new licencing scheme in Nottingham

Government is afraid EPC upgrades will be final straw for landlords, says big bank

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A leading lender believes the government’s likely decision to row back on EPCs is linked to fears that it will hit an already struggling PRS.

Earlier this week, Housing Secretary Michael Gove suggested a delay in bringing in energy efficiency plans – for rental properties to gain an EPC grade C by 2028 – citing financial pressures on landlords.

Shawbrook Bank’s MD of real estate, Emma Cox (main picture), says the rumoured plans to push back this deadline are reflective of the wider economic challenges facing the rented sector, with the government needing to balance the transition to a low carbon economy with protecting socio-economic groups most directly impacted.

“Tenants are facing rising rents and landlords themselves are adapting to a series of tax and regulatory changes over the last few years alongside rising mortgage rates,” says Cox.

Great strides

“While the property sector has been making great strides towards EPC requirements, our research shows that only a quarter of landlords’ portfolios contain properties that all meet the EPC C target.”

Nearly four-in-ten (38%) have properties that are all rated D or below, rising to 58% of investors in London. Some 71% of all landlords still own at least one property in this category, says Shawbrook.

While the proposed timeline could be pushed back, these changes are still coming, adds Cox.

“Acting sooner rather than later can ensure that landlords make the necessary investments to their portfolio and could help to spread that cost over a longer period.

“The lending industry will need to continue to step up with innovative solutions to fund EPC improvements. Landlords themselves could create competitive advantage as energy bills continue to add significant pressure on incomes.”

View Full Article: Government is afraid EPC upgrades will be final straw for landlords, says big bank

Landlords face hefty bill for EPC upgrades

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Landlords face a £30 billion bill to upgrade their properties to an EPC rating of C, according to new research.

Letting agents Savills reveal 2.9 million homes in the PRS need upgrading to meet proposed regulations to bring all properties to EPC C.

View Full Article: Landlords face hefty bill for EPC upgrades