A towering example of Canary Wharf's "evolution"
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
In the story of London's office market, 8 Canada Square in Canary Wharf could be among the main characters.
Many of the key themes have touched the nearly 200-meter tall structure known as the HSBC tower. The global banking powerhouse has been an ironclad tenant for nearly two decades, but will leave in 2027 for a smaller space that better suits its modern workstyles. Similar moves have played out all over the city, but few have been dissected in so much detail because the stakes extend beyond the office market to touch on the future of Canary Wharf itself.
Qatar Investment Authority and Canary Wharf Group control both the building and the narrative. Yesterday, they released striking images of a 1.1 million sq ft redeveloped tower that utilises investment from the QIA to position the building as "a flagship example of the sovereign fund’s vision for multi-use real estate of the future." The silhouette is familiar, but architects at Kohn Pedersen Fox have carved out chunks of the façade to make way for huge terraces. "This redevelopment is another step in Canary Wharf’s evolution into a vibrant mixed-use neighbourhood offering workspace, retail, homes, leisure and amenities all in one location – a true 15-minute city,” said CWG CEO Shobi Khan.
Docklands & Stratford, the office market within which Canary Wharf sits, was the only broad market in London to experience growth in lettings activity during Q1, according to Knight Frank's London Office Market Report. There were four lettings driving a q-on-q rise of 31.5% to 129,322 sq ft. Nevertheless, take-up remained below the quarterly long-term average of 207,018 sq ft for a sixth consecutive quarter.
The student housing pipeline
New Knight Frank figures highlight the UK's worsening shortage of student housing.
Fewer than 17,500 new purpose-built student beds will be added to supply in the 2024/25 academic year, a marginal 0.6% increase on last year’s delivery, but notably below the five-year pre-pandemic average of more than 25,000. A marked slowdown in delivery is a continuation of a longer term trend of fewer new schemes completing each year. Just 60 new PBSA developments will be completed this academic year, this compares with double that a decade ago.
Rising build and site costs, skills and labour shortages, higher financing costs, and tricky-to-navigate planning policy all represent notable headwinds that have contributed to a slowdown in delivery, which has come despite growth in student numbers. Currently, the total pipeline of student beds across the UK is around 160,000, with 22% of this under construction and a further 49% (78,000 beds) with full planning permission granted.
Rental growth for the sector remains elevated – averaging 7.6% across the UK in 2024. Within this headline figure individual markets are seeing varying levels of performance, largely dependent on how stark the imbalance between supply and demand is.
In fact, if you've been tracking the headline indices from the ONS then rental growth across the board isn't quite what it seems. Read more from Ollie Knight, featuring new analysis from Jim Culley, here.
An August bounce?
An August rate cut from the Bank of England looks unlikely after both inflation and wage data published this week failed to suggest that the underlying sources of inflation are beaten. Sterling hit $1.30 after the release of the Consumer Prices Index, the highest in a year.
The numbers suggest that the current stasis in the mortgage market will continue, though it does look likely that - barring any nasty surprises - borrowing costs will ease through the autumn. That would tee up a busy second half in the property market. The results of our latest sentiment survey, out this week, suggests that meaningful numbers of potential buyers opted to delay purchases until after the summer.
The broader economic signals support this narrative. Forecasters released a string of upgrades to their UK outlooks during the past fortnight, including the IMF this week. Consumer confidence is running at a three-year high, according to the latest GfK index, out this morning.
The King's Speech, continued
The government tabled a new Planning and Infrastructure Bill as part of the King's Speech proceedings on Wednesday. The bill will underpin efforts to deliver 1.5 million additional homes during the coming five years. Key parts include:
- A simplified consent process for major infrastructure projects.
- Altered compulsory purchase procedures that will seek to ensure landowners receive compensation that is “fair but not excessive”.
- Modernised planning committees - a process designed to incentivise faster decision making. This will likely include 300 new planners.
- Leveraging development to fund nature recovery efforts.
- New methods to unite disparate parcels of land that can be used for large developments.
Reporting in the FT suggests we'll see "sweeping changes" to the National Planning Policy Framework later this month.
In other news...
Italy's prime property prices are rising amid an influx of foreign residents, enticed by the Mediterranean lifestyle and fiscal benefits. The post-pandemic rise in hybrid working has unleashed a cohort of mobile workers eager to embrace the dolce vita. Kate Everett-Allen takes a deep dive.
Elsewhere - Fear of house purchase delays after Chaps system hit by fault (Times).