Canary Wharf’s pivot looks like a tall order

Two factors suggest a fresh rumpus. One is the debt load of the entity QIA and Brookfield own – now once again called Canary Wharf Group – which holds 43% of the area’s properties but not the HSBC tower, which is wholly owned by QIA. The other is uncertainty over whether the 22-million-square-foot estate can boost ailing rents.

The immediate issue is that about 1.4 billion pounds of CWG secured bank debt and unsecured bonds come due in 2024 and 2025, meaning interest costs will rise. The 2022 rate paid on the unsecured bonds was just 2.6%, according to company disclosures, but the yield implied on CWG bonds maturing in 2025 is an eye-watering 16%. While the secured debt is cheaper, banks will get nervier the more property values dip.

Three-quarters of CWG’s 9-million-square-foot estate is comprised of offices, with just over half housing financial firms. Flexible working means the banks no longer need so much space. Even those sticking around, like Barclays, have consolidated to one building or are creating “grey space” by subletting it to shorter-term tenants.

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