By Iain Withers
LONDON (Reuters) -Qatar’s sovereign wealth fund is revising plans for a revamp of its HSBC skyscraper in London’s Canary Wharf to retain more office space, prompted by a global rebound in demand as companies mandate a return to the office, two sources told Reuters.
The Qatar Investment Authority (QIA) is weighing keeping up to 80% of the 45-storey tower as offices after HSBC leaves in 2027, the sources with knowledge of the matter said.
The QIA, which bought the HSBC tower for 1.1 billion pounds ($1.4 billion) in 2014, had unveiled more radical plans last year to attract a range of alternative uses, including leisure, entertainment, education and potentially a theatre.
Keeping more offices could cut the cost of the project, although QIA’s changes were primarily motivated by shifting demand, the sources said. Cost control is a factor in the revisions, one of the sources said.
The plans are not final and are subject to change, depending on prospective office client demands, the sources added.
Property veteran and former Canary Wharf Group chairman George Iacobescu has been hired as an adviser by QIA on its UK assets, including the HSBC tower and upgrading its sustainability credentials, the sources said. The revised plans for the HSBC skyscraper will broadly retain the exterior design outlined last July, they added.
The QIA declined to comment. Canary Wharf Group, which runs the wider financial district and is co-owned by QIA and Canada’s Brookfield, was not immediately available for comment.
TOWER COULD BE TEMPLATE FOR SKYSCRAPER MAKEOVERS
The HSBC tower overhaul is being closely watched by a property industry looking at ways to refresh tired office buildings. But the changes the QIA is considering ahead of a planning application next year show how a recovery in office demand has changed the picture.
Canary Wharf was hit hard by the pandemic-induced fall in office demand. Companies are now returning, but there is much less appetite for single-tenant skyscrapers like HSBC’s, forcing a rethink.
Older buildings also need refits, with upgrades to nearby towers occupied by Citi, Barclays and Morgan Stanley planned or underway to meet higher staff expectations for their working environment.
The east London financial district has seen an improvement in office leasing as companies struggle to find affordable space in central London, with the likes of Spanish bank BBVA and Britain’s Serious Fraud Office taking space in Canary Wharf.
HSBC has also taken more space in Canary Wharf, after it faced a shortage of space at its planned smaller HQ in the City of London.
The vacancy rate in the wider Docklands area, which includes Canary Wharf, has fallen to 15%, down from a post-pandemic high of as much as 18.6% in March, according to real estate information company CoStar data.
It is still above London’s vacancy rate of 10.4%.
The QIA struck a financing deal last December to borrow 610 million pounds from U.S. investment group Apollo to repay bonds due over two years, raising its funding costs but removing near-term refinancing risks.
MORE CONVENTIONAL OFFICE SPACE, HOTEL MAY BE DITCHED
QIA had earlier planned to cut more office space in the HSBC tower, although it had no firm figure in mind, the sources said. Improved office demand could mean it ditches plans for an up to 80-room hotel in the tower, which would cut office space to 60% of the total space, the sources said.
A final decision will depend on prospective office clients’ requirements.
The HSBC tower revamp is likely to cost hundreds of millions of pounds, but the project team is confident it will be cheaper than Citi’s $1.5 billion upgrade of its nearby Canary Wharf tower, the first source added.
Planned temporary serviced-office space in the tower is also likely to be scrapped in favour of conventional leased offices, while terraces planned higher up by cutting chunks out of the tower may have to be enclosed due to Britain’s bad weather, the first source said.
($1 = 0.7659 pounds)
(Reporting by Iain Withers; Editing by Tommy Reggiori Wilkes and Jane Merriman)
