Morgan Stanley has agreed to keep its London head office at Canary Wharf in a major boost for the Docklands district, with its developer saying reports of an occupier exodus are missing a broader story of rejuvenation and expansion.
The investment bank began looking for a new 600,000-square-foot London headquarters in 2020 ahead of an upcoming break clause. But Morgan Stanley, led by new chief executive Ted Pick, has now signed to remain at Canary Wharf for at least another 14 years.
The group has extended its lease with Canary Wharf Group on its 547,000-square-foot EMEA headquarters at 20 Bank Street. The lease will run until 2038 and includes an investment to improve the property’s sustainability performance from Canary Wharf.
“Canary Wharf has been the location for our EMEA headquarters for over 30 years and we’re pleased to be extending that tenure,” said Chris Beatty, EMEA chief operating officer for Morgan Stanley, in a statement. “The Wharf is a great place to work and we’re looking forward to witnessing the next stages of Canary Wharf’s evolution first hand.”
Shobi Khan, chief executive, CWG, added in a statement: “Occupiers increasingly value Canary Wharf’s vibrant mixed-use neighbourhood for its excellent transport links, diverse leisure and amenities including access to 5km of water boardwalks and 16.5 acres of parks. In addition, with over 300 shops and 70 cafes, bars, and restaurants, there is a plethora of diverse retail and dining options.
“Morgan Stanley will continue to benefit from CWG's partnership with the Eden Project, greening the estate and transforming the Middle Dock, opening up the water and providing greenery for everyone to enjoy.”
Morgan Stanley's 4,600 London staff occupy about 800,000 square feet across two offices in Canary Wharf, at 25 Cabot Square and 20 Bank Street, both of which were designed by SOM for the bank. The bank has said it will also continue to occupy some space in 25 Cabot Square. The group, which also employs 1,600 people in Glasgow, was one of the first big tenants to move to Canary Wharf as the district began to establish itself as the address of choice for global investment banks in the capital in the early 90s.
Within the last two years that trend has been reversing with HSBC relocating from the more than 1 million square feet it had occupied in Canary Wharf for more than two decades to 556,000 square feet at Panorama, 81 Newgate Street in the City, while ratings agency Moody's will move to around 120,000 square feet of offices at 10 Gresham Street in the City in 2026 when its lease expires at One Canada Square, the iconic tower at the heart of the Docklands estate. Law firm Clifford Chance decided to relocate back to the City taking 312,000 square feet at GPE's 2 Aldermanbury Square, having been based at 10 Upper Bank Street in Canary Wharf since 2003 with its lease running until 2028. The firm first prelet around one million square feet in the Docklands.
Speaking to CoStar News, John Mulqueen, chief investment officer at Canary Wharf Group, point out that Morgan Stanley's decision in fact means four of the top six investment banks in the world, Barclays, Morgan Stanley, JP Morgan Chase and Citibank, have all committed to staying on the estate in major offices for at least another six years. The other two largest by size - Goldman Sachs and Bank of America Securities - are based in the City.
Mulqueen says the headline grabbing figures about relocations from the estate mask a broader story of new tenants moving to better buildings at the estate, or long-term financial occupiers committing to stay. He points that two of the big four management consultants - EY at 25 Churchill Place and KPMG at 15 Canada Square - also remain firmly on the estate.
Last year CoStar News revealed that challenger bank Revolut is in talks to take in excess of 100,000 square feet at Quadrant and Oaktree's YY building at the estate with rents of in excess of £60 per square feet now expected for the better space.
The Canary Wharf estate comprises around 17 million square feet of offices, around half of which are owned by Canary Wharf Group, which in turn is owned jointly by Brookfield Property Partners and Qatar Investment Corporation. Some of the remaining buildings are owned by Brookfield or Qatar separately.
Mark Stansfield, head of UK analytics for CoStar, says Morgan Stanley's decision could prove a milestone: “Morgan Stanley’s announcement comes hot on the heels of Barclays' recommitment to its 820,000-square-foot office at 1 Churchill Place in December and provides another shot in the arm to a part of London that has struggled more than most in recent years. The office vacancy rate in Docklands climbed to 15.2% in March 2024, up from 13.4% a year earlier and just 4% seven years ago. Big departures by the likes of HSBC and Clifford Chance are likely to push it up further in the next couple of years, though recent banking commitments and the area’s increasingly diverse occupier base and pivot to life sciences could help to stem the tide.”
Mulqueen says the 15.2% vacancy rate in the offices is high, but says that figure takes in the entire estate, while across the primarily Grade A offices owned by Canary Wharf Group vacancy is sub-8%.
Safina Mirza, director of communications at Canary Wharf, adds: "The picture is not as black and white as is reported some times."
The figures have been boosted by recent large tenant commitments including Barclays extending its lease until 2039, and Citibank committing to investing £100 million to upgrading its offices at 25 Canada Square.
In October Canary Wharf Group announced that its shareholders, Brookfield and the Qatar Investment Authority, had committed £400 million to the estate by way of a £300 million equity subscription and a £100 million revolving credit facility. The proceeds are being used to complete the strategic repositioning of the estate and build out additional residential and life sciences projects on the estate.
"I think the market is shifting," says Mulqueen of the broader office occupancy trend being seen in London. "A lot of deals are happening here and in the City because corporates are now looking five years out and seeing what is coming down the tracks and having to commit to schemes earlier. Business confidence is returning with expected interest rates falls and we expect rental growth to continue for the best space."
Mirza points out that visitor numbers at Canary Wharf are at an all-time high too. She says 67.2 million people visited Canary Wharf during 2023, a 25% increase on 2022. And the estate continues to see strong growth and interest across retail, leisure, and hospitality with 97% occupancy and sales at an "all-time high".
"We have over 310 retailers, retail at 97.8% occupancy in full year 2022 and retail sales have exceeded 2019 levels and are the highest in our history."
The estate has also signed over 70 cafes, bars and restaurants, up by 30 since the national COVID-19 lockdowns ended, including Hawksmoor, Mercato Metropolitano, Dishoom and Blacklock, and the opening soon Roe, Hovarda and Kricket.
There are also eight grocery stores, Marks and Spencer, Tesco and Amazon Fresh, Chinese supermarket Tian Tian, MMy (Mercarto), Morrisons and what Mulqueen says is the best performing Waitrose in the UK.
Mulqueen points out that the build to rent residential portfolio is "fully occupied and is achieving 8% growth with over 3,500 people living at Canary Wharf". This is set to double, he says.
Much of this development is taking place at the expanded Canary Wharf estate to the east at Wood Wharf, which now has a Qube music studio, Tribe hotel, NHS surgery, a kindergarten and a new co-ed government school opening in 2024, the Mulberry Academy.
The estate is also diversifying its occupier base, in part focusing on life sciences and a tie up with Kadans that will see it build Europe's largest life sciences tower.
Mulqueen points out that the estate is already home to Genomics England, Barts Health NHS Trust, the Medicines and Healthcare products Regulatory Agency, UK Health Security Agency, Medical Defence Union and General Pharmaceutical, NHS transformation, AviadoBio and hVIVO, while its fully occupied Level39 start-up tech floor at One Canada Square has attracted a number of life science start-ups including TC BioPharm, Neural Rays, L Base, Sanius Health Congenica and The Cancer Awareness Trust.
Mulqueen says the principal focus has been on creating an improved environment.
"The work that Shobi has been carrying out since before the pandemic on the greening of the estate and the Middle Dock scheme is so important. Tenant moves now really are driven by is this the best space available. With the life sciences tower we are doing exactly what the estate did first with offices really. With Kadans we are building the most advanced life sciences space in Europe."