(This article has been updated on 26 June to add comment from Mark Stansfield and Marcus Phayre-Mudge).
HSBC is to leave its more than 1-million-square-foot Canary Wharf headquarters after more than two decades, moving to closer to 500,000 square feet at the redeveloped former British Telecom head office near St Paul’s Cathedral in the City of London, reports The Times.
The Times says the relocation will take place in 2027, when the bank's lease on the 45-floor tower at 8 Canada Square expires, under plans it says are likely to be announced to employees at the bank on Monday. The Financial Times later reported that it had seen the internal memo confirming the proposed move.
CoStar News first revealed the HSBC requirement was for between 450,000 square feet and 500,000 square feet and would take in the City as well as staying in Canary Wharf. Cushman & Wakefield has been advising.
HSBC has occupied its home in London’s Canary Wharf since 2002. It leases more than 1 million square feet, according to CoStar data.
According to Bloomberg, HSBC was presented with a shortlist of possible alternatives, which included Chinese Estates Holdings' Evergo Tower redevelopment of the former headquarters of Goldman Sachs at River Court, 120 Fleet Street.
Other options on the list included the former home of the European Bank of Restructuring and Development at 175 Bishopsgate plus options at Canary Wharf Group's Wood Wharf at the Docklands site.
The bank has reportedly now opted for BT Group’s former headquarters at 81 Newgate Street in St Paul’s, which is being redeveloped by Orion Capital Partners and Pella Real Estate Partners. Orion has been redeveloping the building to improve its environmental credentials and offer roof terraces as well as 556,000 square feet of offices. Tejat V Lux bought 81 Newgate Street from BT in August 2019 advised by Orion Capital Mangers.
Responding to changes in hybrid working, and the lease expiry, HSBC announced in September that it planned to undertake a review of the best future location in London for its global headquarters, including the option of staying in the current building. HSBC said its ambition is to have an "even more flexible and dynamic head office that meets the needs of colleagues and clients".
Cushman & Wakefield said a global multi-disciplinary team will ensure that HSBC’s real estate strategy is "informed by market-leading insight on workplace experience, sustainability, and wellness".
HSBC has been down this road before and stayed put.
In 2016, in the wake of the Brexit vote, the bank confirmed it would be staying in Canary Wharf after indicating it would consider leaving London, where it has been headquartered since 1992, with Hong Kong touted as a potential new home.
At the time then-chancellor George Osborne had implemented a change in the system for taxing banks. A bank levy on balance sheets, which hit HSBC particularly hard, was scaled back meaning HSBC would pay £300 million to the exchequer, down from £1 billion under the previous system.
After the board's unanimous decision to stay in London in 2016, the bank also detailed that it would abandon its usual, exhaustive practice of reviewing its headquarters every three years.
HSBC highlighted the “large pool of highly skilled, international talent” based in the capital and its continuing position as “one of the world’s leading financial centres” as key drivers behind the decision to stay.
Qatar's sovereign wealth fund completed its purchase of the 1.1 million-square-foot HSBC Tower for around £1.175 billion in 2014.
HSBC joins a number of leading corporates reducing its office space as it enables more hybrid working and reduces its carbon footprint.
Law firm Clifford Chance said last autumn that it would move from its Canary Wharf office to a “net zero” building at GPE's 2 Aldermanbury Square in the City.
CoStar's senior director of UK Market Analytics, Mark Stansfield, said: "HSBC’s decision to exit Canary Wharf is another blow to a part of London that has been hit disproportionately hard since the pandemic began. Many of the large banks based here are cutting their office footprints.
"Barclays exited a 500,000-square-foot building here earlier this year to consolidate into another building nearby. Citigroup is embarking on a similar plan, with the American banking giant renovating its 42-storey tower at 25 Canada Square and electing not to renew its lease at nearby 33 Canada Square upon expiry in 2027. Credit Suisse's building is also likely to come to market after its recent takeover by UBS.
"Other big banks like JPMorgan and Morgan Stanley and fintech firms like Revolut have also signalled their intention to allow at least some staff to continue working remotely on a permanent basis. But it's not just financial firms scaling back."
According to CoStar's data, at 15.5%, Docklands has one of the highest vacancy rates in London, following more than 1 million square feet of demand losses since the pandemic struck.
That is above the central London average of 9.1% – vacancy rates are as low as 3% in some parts of the West End – and could rise further in the near term as a couple of large buildings complete construction in an environment of subdued demand.
The estate is diversifying the tenant base in response. Boston Consulting Group took 50,000 square feet in a noteworthy deal in September 2022, with tech giant Apple also leasing a large space there during the pandemic. Genomics England and Kadans have both signed significant lettings over the past year as the Canary Wharf Group positions Docklands as a life sciences hub.
Stansfield added: "The arrival of Elizabeth line services, which have reduced journey times to Heathrow Airport, the City and the West End, provided a major plus for the area in 2022."
Marcus Phayre-Mudge, fund manager at TR Property Investment Trust, said offices remain crucial infrastructure for knowledge-based businesses, with in-person interaction remaining a vital part of business life. But he added: "The amount of space required has reduced. Even prior to the pandemic and this new era of flexible working, many Canary Wharf tenants had too much space, making HSBC’s unsurprising move part of a wider trend."
Phayre-Mudge continued: "Twenty years ago, Canary Wharf provided large banks and financial services companies with the huge floor space needed at the time. Since the 1990s we have seen a steady increase in the densification of office usage as technology and improvements to air quality resulted in the average amount of space per person to almost halve.
"Crucially, demand for better quality office space is still rising, he added: "We are in the midst of a ‘green building super cycle’, characterised by an increase in demand for environmentally friendly buildings in major cities, offering state-of-the-art amenities that entice workers back. The result is a historically wide market bifurcation between best in class, well located, energy efficient buildings and the rest.
"It makes sense that HSBC is choosing to move back to the City and interesting that they are choosing to move westwards to St Paul's rather than the traditional City core."