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The owners of Canary Wharf Group will inject £400mn of fresh capital into the London office district, which has suffered the departure of key tenants as companies cut back office space in response to hybrid working.
Private equity group Brookfield and the Qatar Investment Authority, which have owned the east London financial centre since 2015, on Wednesday announced an equity infusion of £300mn and a £100mn revolving credit facility.
The decision to put in new money to the development comes as the London financial district battles slowing demand for its office space and seeks to attract residents and life sciences businesses.
Brian Kingston, chief executive of Brookfield Real Estate, said the firm was “pleased to continue to support” Canary Wharf Group as it “continues to evolve into a vibrant and diverse estate”.
Canary Wharf’s appeal to large companies has suffered since the Covid-19 pandemic, as staff have shifted to working from home and businesses cut office space. It has also been hit by high-profile exits including HSBC, which in June said it would move out of its 42-storey Norman Foster-designed headquarters tower by 2026.
The highly-anticipated decision by HSBC to move its headquarters to the City of London was seen as a bellwether for financial services tenants, which have historically dominated in Canary Wharf. Just over half of the site’s tenants were in the financial services sector, the company said in its annual report.
Large-scale office towers, which were popular when Canary Wharf was developed, have fallen out of favour as companies opt for city centre sites to encourage in-person work.
Staff at Credit Suisse were told in September that they would begin moving out of Canary Wharf to UBS’s offices in the City. Office vacancy in Canary Wharf remains higher than in other London districts at 14 per cent, compared with 11 per cent in the City and 6 per cent in the west end, according to CoStar data.
Canary Wharf Group’s efforts to diversify the estate, which date back to before the pandemic, have met with some success. The district now includes more than 1,000 rental flats, with more than 3,500 people living in the area according to CWG.
The site also now houses a number of healthcare and life sciences-focused organisations including Genomics England, Barts Health NHS and the General Pharmaceutical Council.
CWG has spent on developing green space and tried to encourage shops and restaurants. “This investment underscores confidence in our business plan and the ongoing strategic repositioning of Canary Wharf,” said CWG chief executive Shobi Khan.
Earlier this year, rating agency Moody’s downgraded the debt of Canary Wharf Investment Holdings citing a “difficult operating and funding environment for real estate companies”. Its report also noted Canary Wharf had £1.4bn of debt that needed to be refinanced in 2024 and 2025.
CWG disclosed it has refinanced or extended about £450mn of debt in the first half of 2023, with no further debt maturities this year. The company has about £800mn of maturities in 2024. A person familiar with the matter said plans to meet CWG’s 2024 refinancing obligations were not expected to use the new capital.
