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Canary Wharf Group’s office buildings shed another £180mn in value last year after taking a hit of almost £1bn the year before, in the latest sign of stress in the commercial office market.
Independent valuers marked down offices owned by CWG by 4.1 per cent to £4.2bn at the end of 2024, which the London landlord attributed to “market sentiment”.
The drop was far less precipitous than in 2023, however, when the offices shed £954mn. In the second half of 2024, valuations only slipped 0.7 per cent.
The stabilisation is a positive signal for the office sector, which was battered by lingering vacancies after workers adopted hybrid working during the Covid-19 pandemic and by mounting financing costs in the face of higher interest rates.
Canary Wharf has been more affected than central areas such as the City of London.
Some of its most high-profile tenants, including HSBC, State Street and Clifford Chance, have decided to move their offices away from the estate, although Barclays, Morgan Stanley and Revolut have extended their leases.
“We made good progress in 2024, with valuations stable in the second half of the year as expected,” said chief financial officer Becky Worthington, adding that the group had a strong start to the year with “active” demand for leasing “at the highest levels we have seen in the last five years”.
CWG, which is owned by Brookfield and the Qatar Investment Authority, has sought to diversify away from office space and expand its residential and retail footprint.
Retail property values climbed last year, helping to offset some of the decline in offices.
The estate reported a 1.2 per cent fall in the value of its overall property holdings to £6.8bn. It had posted a 14.7 drop the previous year.
Despite the relative stabilisation in the group’s valuations, Canary Wharf’s occupancy rate still fell slightly to 88.2 per cent at the end of last year, down from 91 per cent a year earlier.
The Docklands area has the highest vacancy rate of the main London office areas at 18.5 per cent, according to data provider CoStar, which estimates it could rise to about 30 per cent in the coming years following the departure of big tenants such as HSBC and State Street.
The landlord completed several major refinancings last year that culminated in US private capital group Apollo lending it £610mn to pay off its bonds, allowing the estate to refinance at higher interest costs.
The deal left Canary Wharf with no large debt due before 2028. CWG secured £2bn of financing last year.
The group, which last year struck 70 new retail leases, said income from rents collected on retail buildings such as shops and restaurants had risen by £2.6mn to £71.mn throughout the year. CWG said its retail occupancy rate had risen from 95.6 per cent to 97.4 per cent.
