London's Canary Wharf office vacancies hit new record, data shows

By Iain Withers

LONDON (Reuters) - Office vacancies in London's Canary Wharf district have reached a record high and could hit as much as 30% in the coming years if the area cannot find tenants to fill 2 million square feet of space becoming vacant, according to property data firm CoStar.

The east London financial district is struggling to recover from a pandemic-induced drop in demand, even as other central areas of the city and prime locations globally from New York to Paris show signs of recovery.

The former docklands area was transformed from the late 1980s onwards into a cluster of towers occupied largely by banks, but has suffered recently as some major tenants such as HSBC opt to move nearer the city centre.

Vacancies in the "Docklands Core" area - which incorporates Canary Wharf and part of the surrounding Isle of Dogs peninsula - hit 18.6% last month, the highest recorded level in data going back to 2003, CoStar said.

That vacancy rate was 9.8% in March 2020 and 3.5% eight years ago. By contrast, the latest vacancy rates in the City and West End were 9.8% and 7.6% respectively, CoStar said, adding the figures were preliminary.

Planned Canary Wharf departures including HSBC - which leaves its 45-storey office in 2027 - could push the rate to 30%, CoStar said, though that estimate was based on none of the vacated space being filled.

Canary Wharf Group (CWG), which manages much of the area and is owned by Brookfield and the Qatar Investment Authority, has said it is diversifying its tenant mix and looking at repurposing some offices for other uses, as is planned for the vacated HSBC skyscraper.

CWG declined to comment.

Canary Wharf is also undergoing a multi-year transformation, including development of new flats, hotels, laboratories and a theatre.

Big banking tenants Citi, Morgan Stanley and Barclays have committed to staying, while Fintech Zopa recently announced a move to the area.

(Reporting by Iain Withers, Editing by Tommy Reggiori Wilkes and Alex Richardson)