London's Canary Wharf financial district is planning to transform large portions of its vacant office spaces into various uses, including hotels, according to two executives at the landlord who spoke to Reuters. This move comes as the district responds to declining demand for its expansive office towers. Canary Wharf is viewed as a test case for reimagining struggling business districts, especially after high borrowing costs and the rise of remote work post-pandemic have significantly impacted global commercial property values. Purpose-built complexes like Canary Wharf, Paris's La Defense, and many in the U.S. have been particularly affected.
The vacancy rate for offices in London's Docklands area, which includes Canary Wharf, has surged from as low as 4% in 2017 to nearly 17% as of September this year, according to CoStar data. The vacancy rate in the more central City district stands at 11%. In response, Canary Wharf plans to revitalize the area by enhancing its green spaces, renovating outdated buildings, and repurposing some into hotels, leisure facilities, retail spaces, academic institutions, and cultural venues, the executives said. Overhauling offices will be expensive, with costs likely running into the hundreds of millions of pounds or more for the owners and any hotel operators.
The area's landlord, Canary Wharf Group (CWG), has faced financial challenges. In April, it reported a 15% drop in property values over the past year, driven by falling demand for offices. Last month, credit agency Fitch further downgraded its credit rating into junk territory. "There are definitely opportunities for us to introduce uses that are undersupplied," John Mulqueen, chief investment officer at CWG, told Reuters, noting that hotels are a compelling option for vacant space. CWG, owned by Canadian investor Brookfield and Qatar Investment Authority, is considering over 30 proposals from hotel operators, Mulqueen said, adding that the area's office tenants, including JP Morgan and Barclays, support the idea.
"They don't want to send staff to the West End and pay 300 pounds a night," he said, referring to a popular central London district. "They'd rather keep them here." Mulqueen added that CWG would be selective about hotel proposals. By early 2025, Canary Wharf will have more than 1,000 hotel or short-term let apartment rooms available, including at the hotel 'Tribe' that opened two years ago. A 74-bed boutique hotel is close to signing, which would open in late 2025, CWG added. One senior London-based commercial real estate agent, who declined to be named, was skeptical about the potential for hotels, noting that visitors to London, including for work, typically prefer to be in the city center.
In July, CWG unveiled plans to redevelop one of the area's tallest office buildings, a 45-floor tower set to be vacated by HSBC, into a mix of uses including potentially a hotel. Further buildings are likely to be repurposed, said Tom Venner, CWG's chief development officer, although he noted that offices would remain a core part of the mix. The former docklands area is already building more flats, restaurants, and laboratories, but now more focus will be paid to revamping the core office cluster, the executives said. On Wednesday, Canary Wharf opened a new waterfront decking area to the public around one of its central docks, as part of a broader push to green the estate.
Mulqueen said office inquiries had picked up, and the landlord was in discussions with potential tenants about taking more than 300,000 square feet of space. Canary Wharf will likely benefit from the lack of new office space being built across London, Mulqueen said. "I strongly believe in the office market in the long run," he said.
