London office space: Canary Wharf makes a comeback
Working from home will not mean the end of the office. Landlords of high-quality London office space will do fine, says Max King

It has become conventional wisdom that the pandemic is bad news for the commercial property sector. The shift to working from home will be partly permanent with people spending only two, three or four days a week in the office. Offices will need to be reconfigured to allow for desk-sharing, an increased number of meeting rooms and improved amenities to make working there more attractive, but overall demand will still be lower.
The principal victim of the downsizing of space requirements will be the owners of large office spaces into which nobody will be downsizing. The most obvious of these is Canary Wharf, a development based on office spaces of half a million to one million square feet. Perhaps Canary Wharf could even become a white elephant as competition from other modern developments siphons away demand and empty offices put off new tenants.
If this is what investors believe, it is nonsense. Tenants are moving in, not out. Societe Generale arrived in 2020 and the European Bank for Reconstruction and Development EBRD will do so this year, “plus half a dozen smaller tenants in the last year”, according to Howard Dawber, the managing director of strategy at Canary Wharf Group (CWG). US banking giant Citi is spending £100m revamping the 200-metre tower it bought as its Europe, Middle East and Africa headquarters in 2019 for £1.2bn. Moreover, CWG is adding five million square feet of new space to its existing 21 million. This is mostly in smaller buildings with “state-of-the-art” office space of 100,000 to 200,000 square feet, competing with the More London development near Tower Bridge. This appeals to smaller occupiers, including specialised buildings for the tech and life-sciences sectors.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
In addition, Wood Wharf has four blocks of residential flats, both for sale – “selling well” – and rental. So much for the view that everyone wanted to move out of central London. This is part of the diversification of Canary Wharf, which initially focused on the financial sector but is now more broadly spread. Retail and destination leisure space has been expanded catering not just for the 100,000 who work there, but also the 180,000 who live within walking distance.
Customers are coming back
“We have the second-highest footfall of any shopping centre in London and trading is almost back to pre-pandemic levels. Food and beverage outlets, now a major attraction to Canary Wharf in their own right, are even beating the 2019 numbers,” says Dawber. Rumours of the demise of London’s shops and restaurants have also been exaggerated. Many have closed down, but new tenants have moved in to take their place, perhaps drawn in by lower rents.
The switch to cashless trading has been a bonanza for bars, sandwich shops, bakers and other high-volume retailers, increasing service efficiency, reducing the tedious and time-consuming tasks of till reconciliation and the banking of takings. This reduces both till shortfalls and staff requirements. Online shopping has its limitations and may even have reached maturity as a share of spending ,while take-away or home-delivered food can never compete with the middle- or upper-market restaurant experience.
CWG, now owned half by the Qataris and half by the Canadian-listed Brookfield Asset Management, has also moved outside its core area, in recent years developing the “Walkie-Talkie” building in the City and the old Shell headquarters, once voted London’s ugliest building, on the South Bank.
Why is Canary Wharf doing so well? “We went into the pandemic with a shortage of high-quality office space in London,” says Dawber. “The last two years will have brought speculative development to a halt while underlying demand for good space is strong.” It looks likely that the economic data, which shows GDP having recovered to pre-pandemic levels and record employment, is still understating the strength of the London and maybe the whole UK economy.
Canary Wharf can only be boosted by the imminent opening of the cross-London Elizabeth line, which will reduce the travel time to Heathrow to just 38 minutes. The government wanted CWG to contribute £1bn to the cost of a station originally priced at £1.2bn. The group offered to take on all the risk of building the station in return for contributing just £150m towards a fixed-price contract. The station was completed on time and on budget for a cost of £550m. The government saved over £750m and CWG’s contribution will have been offset by the value of the 120,000 square feet of retail space built above it.
Not all of London’s office space is prospering. Rents on small, poorly located, outdated tertiary office space have fallen. The demand is for new or refurbished, flexible space that is well located and has good amenities. Demand for tertiary space will pick up as central London returns to normal, but this is not an investable proposition. Unfortunately, CWG is not listed and Brookfield (up 140% in five years) gives only a very diluted exposure. However, if Canary Wharf is doing well, so is all central London property, to the benefit of Great Portland Estates (LSE: GPE) and Derwent London (LSE: DLN).
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.
After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.
-
City watchdog warning: wealthy savers hold too much cash
Damning FCA reports finds wealthy savers are holding £10,000 or more in cash, but should invest instead or risk stagnated returns.
-
Inheritance tax could be due on the average property in just 10 years
Rising house prices and frozen tax thresholds could mean inheritance tax is payable on the average home from 2035
-
Greg Abel: Warren Buffett’s heir takes the throne
Greg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?
Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?
Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
-
'As AGMs go digital, firms must offer a new form of scrutiny for shareholders'
Opinion Technology has rendered big AGM meet-ups obsolete, but the board still needs to be held to account, says Matthew Lynn
-
Unilever braces for inflation amid tariff uncertainty – what does it mean for investors?
Consumer-goods giant Unilever has made steady progress simplifying its operations. Will tariffs now cause turbulence?
-
Two ways to tap into monopoly profits from airports
Most investors can’t get their hands on airports. Here are two ways you can
-
Fat profits: should you invest in weight-loss drugs?
The latest weight-loss treatments could transform public health and the world economy. Should you invest?
-
How investors could profit from Ramsden Holdings' four-part growth strategy
Ramsdens Holdings offers a diversified set of financial and retail services and a juicy yield, says Dr Michael Tubbs