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Commercial real estate values have taken a big hit as workers continue to shun offices even after the pandemic.
The rise of hybrid work has left many companies with largely empty offices in buildings that are now worth much less than they were a few years ago.
Canary Wharf Group (CWG), the property developer that controls much of east London’s financial district, thinks it has an answer to this problem.
HSBC is due to move out of the 45-storey building, which was completed in 2002, in 2027. The group plans to transform the skyscraper into a “unique destination” rather than just an office space.
Rather than leasing space to new corporate clients, the building will be divided into a combination of workspace, leisure, entertainment, education and cultural attractions.
Renderings show how parts of the building will be cut away to create spaces for terraces, gardens, observation decks and even a rooftop bar.
A commercial area with a pedestrian water feature and a red spiral staircase are also planned.
The CWG calls the plan “one of the largest redevelopment projects in the world,” and it is scheduled to be completed by 2030.
Global banks such as Credit Suisse, JP Morgan, Deutsche Bank and Citibank also have high-rise offices in Canary Wharf.
But CWG’s plans show that single-use office space no longer generates enough revenue for property owners.
Office occupancy rates remain at record lows, depressing corporate real estate values and sending interest rates soaring.
For the real estate industry, the situation is a “slow-motion train wreck.” Steen van NieuwelburgProfessor of Real Estate at Columbia Business School.
Companies are doing their best to encourage, and in some cases force, employees to return to the office, but many are refusing the effort, leaving many desks empty.
The real estate crisis overlaps with another trend in urban development: the creation of more liveable urban centres.
The “15-Minute City” concept involves developing neighborhoods where residents can work, shop, and play within 15 minutes of their home by foot, bike or public transportation.
The concept was piloted in Portland, Oregon, Paris.
Around 67 million people are expected to visit Canary Wharf in 2023, and CWG said meeting visitor needs would play a major role in the refurbishment.
“This redevelopment marks another step in Canary Wharf’s evolution into a vibrant mixed-use precinct offering workspace, retail, housing, leisure facilities and amenities all in one place – a true 15-minute city,” CWG CEO Shoubi Khan said in a press release.
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