Why global giants are building their UK HQs in the least likely locations.
If you wanted office space in London, there used to be two options: the City and the West End. Then, in the 1980s, Canadian developer Olympia & York, encouraged by Prime Minister Margaret Thatcher’s Conservative government, created Canary Wharf to offer American investment banks huge new buildings, and London’s duopoly of work places was broken.
Throughout the 2000s, Docklands, City and West End continued as the capital’s key office sectors (with Croydon’s 1970s push for growth a fast-fading memory). But in the last three years something remarkable has happened. Creative companies have rejected the traditional areas with the aim of stamping their own identity on a place – and a cadre of innovative developers have been only too happy to help establish them off the beaten track.
Whole swathes of London have opened up to the world’s biggest corporates. The Malaysian-backed redevelopment of Battersea Power Station is the most striking case in point. In September 2016, Apple agreed to lease 500,000 sqft of offices in the main building’s central Boiler House.
Chinese investment in the City soared in 2016, and devaluation of the pound will only help attract overseas capital
The successful regeneration of Battersea, it is said, will inject £20bn into the UK economy and create 20,000 jobs, and helped put in place a funding mechanism for an extension for the Northern Line, tunnelling for which begins in March 2017. There have also been strong forward sales at the development’s residential component, but Apple’s arrival will surely add to this momentum. In total the development will cover 42 acres and include 4,353 new homes, of which 600 will be affordable.
As he pursues a `London is Open’ campaign, Mayor Sadiq Khan has been at pains to stress the importance of Apple’s commitment to a new headquarters in the capital, stressing that it is “the leading city for trade and investment.”
Rob Tincknell, CEO of Battersea Power Station Development Company, says that “it has always been our commitment to create one of London’s most thriving new communities and this commitment from Apple will undoubtedly help us to achieve our goal.”
Kings Cross has also hit the map as an office location, but its developers took a different route to success. When the office market slumped during the late 2000s global financial crisis, demand from corporate occupiers dried up. So, the development consortium led by Argent instead attracted London’s University of the Arts to their Granary Building at Kings Cross, kick-starting regeneration with students instead of suits.
Many in the property market scoffed, lacking the vision to see that millennials would soon become the most desirable customers. Then, in a startling move, Google agreed to occupy a giant new HQ at Kings Cross, seemingly buying into the buzz initially created by the students.
Transport plays an important part, too, in the diversification of big corporates across the capital. With Crossrail stopping at Tottenham Court Road, Facebook has opted to open a new headquarters at developer Great Portland Estates’ Rathbone Square development, in an area traditionally associated with the retail trade.
There are other examples, too. Blackstone’s St Katharine Docks is, according to Estates Gazette, one of London’s hidden gems, on the edge of the City next to the Tower of London. International House at St Katharine Docks is now 93 per cent occupied following the letting of the fifth and sixth floors totalling 55,800sqft to WeWork, the American co-working giant that has taken London by storm. Other new occupiers at St Katharine Docks include shipping operator Clarksons (in 75,000sqft) and tech services firm Six Degrees Group.
This has had a positive knock-on effect to neighbouring London Dock, the development by Berkeley Group arm St George, on the site of the former News International complex in Wapping, which the Evening Standard has christened “the Covent Garden of the East.”
But will Theresa May’s Brexit strategy encourage more of this growth? London’s property players took immense encouragement from Apple’s commitment to Battersea in September, and so far there is little sign of the market being knocked off course. According to adviser Knight Frank, Chinese investment in the City of London in particular soared in the second half of 2016, and devaluation of the pound will only help attract overseas capital to London.
While UBS and HSBC’s promise to move workers out of London because of Brexit has caused tremors, the impact on the property market is expected to be superficial, not least because London remains short of new office space despite development being dispersed across the city. The question of the next corporate giant to lay down a marker in a new, untapped London location begins with ‘when’, not ‘if’.
Giles Barrie is Managing Director, Strategic Communications of FTI Consulting, and a former Editor-In-Chief of Property Week.