Apple and Citadel Fuel London Office Boom
Tech and finance companies, many from the U.S., are filling the swankiest spaces in the ancient commercial quarter known as the City
London's commercial quarter is experiencing an office boom, driven by finance, tech and American firms.
Rents for prime office spaces in the City of London have surged over 50% since 2020.
New skyscrapers and amenities attract tenants but there have been tensions with heritage groups.
LONDON—Larry Fink complains BlackRock is running out of desks. HSBC’s new tower turned out to be too small. Ken Griffin’s hedge fund, Citadel, signed a lease on a building three years ahead of time.
The office market in London’s ancient commercial quarter—known simply as the City—is booming, fueled by an influx of American law and finance firms, a growing tech scene and demand for the swankiest spaces to lure workers back to their desks.
The boom shows Britain’s finance industry has defied fears of a post-Brexit exodus. Despite losing some business and financiers after the U.K. left the European Union, London still hosts by far the biggest banking and capital markets in Europe.
The buoyant market also reflects the district’s broadening appeal. For decades the area was a bastion of finance and insurance. Now tech companies—including Apple, TikTok and several thousand smaller firms—vie for space, drawn in part by the prospect of easy access to potential investors.
“London, as a location for international businesses, seems to have really proven its resilience,” said Martin Towns, who runs M&G’s $43 billion real-estate business. “The City has a renewed level of vibrancy.”
The City, officially called the City of London, is a district of historic buildings and gleaming office towers packed into roughly a square mile of land on the north bank of the River Thames. It is home to the Bank of England, the London Stock Exchange and St. Paul’s Cathedral.
The area was London’s birthplace in Roman times, remnants of which are often dug up by developers. Dozens of trade associations known as guilds, some of which still exist, emerged when it became the principal place to do business in the Middle Ages.
Canary Wharf, a dock-turned-financial district in East London, prised banks away in the 1990s and 2000s with its shiny towers. But London’s historic place of commerce is back in the ascendancy.
Rents for snazzy offices in the City’s newest towers have jumped more than 50% since 2020, to more than $160 a square foot, according to real-estate broker Cushman & Wakefield. By comparison, Grade A offices on New York’s Park Avenue—home to big banks and hedge funds—fetch about $116.
The City drove a record number of leasing deals in the wider area last year, Cushman said. In New York, there has been a similar flight to high-quality offices since Covid.
The City of London Corporation championed the construction of a new generation of skyscrapers to win back businesses. The centuries-old local authority has also worked to jazz up the area’s cultural appeal, prodding developers to incorporate public spaces and dining spots. The quarter’s central location and transport links are another plus for employers trying to encourage staff to return to the office.
The City does face challenges. London’s stock exchange is battling long-term decline. Britain’s banks have struggled to compete with American rivals since the financial crisis. And though it throngs with workers in the middle of the week, the area lacks some of its prepandemic buzz. Footfall is still down at most of its metro stations.
New towers have fanned tensions with heritage groups who worry about the proximity of new skyscrapers to historic sites such as the Tower of London. Planning constraints include rules to preserve views of St. Paul’s.
A cluster of skyscrapers has shot up this century, with nicknames such as the Gherkin, Cheesegrater and Walkie-Talkie. Several more developments—including 1 Undershaft, which would be Western Europe’s joint-tallest building—have been approved.
The new towers won’t come soon enough to prevent a shortfall of offices in the next few years, said Kevin Darvishi, leasing director at Stanhope, a real-estate developer. Many companies signed short-term deals emerging from the pandemic, he said, and some are now hunting for longer-term arrangements.
BlackRock CEO Fink has lamented the lack of space in London after the asset manager’s recent acquisitions, telling Britain’s Times newspaper earlier this year he would build his own office if he could do so quickly. BlackRock has a decade left on its lease near the Bank of England, and people close to the firm have said it isn’t in any rush.
New offices with bells and whistles are particularly in vogue. The City’s tallest building, 22 Bishopsgate, has a Gordon Ramsay restaurant on its top floor and a climbing wall on the window of the 25th. Tenants include Apple, Nasdaq and Skadden, the law firm.
At 40 Leadenhall, tenants—including law firm Kirkland & Ellis and insurer Chubb—have access to saunas, a hair salon and a screening room. The building, nicknamed Gotham City for its neo-gothic-inspired design, opened last year fully occupied.
Fancier facilities have boosted rents, pushing some would-be tenants to go elsewhere. One beneficiary is Canary Wharf, which has struggled since the pandemic because of its out-of-town location and aging towers.
Having said it would relocate to the City, HSBC recently renewed a lease at its older home in Canary Wharf after realizing its new building won’t fit everyone.
Hedge funds are among the City’s fastest-growing tenants, according to broker Knight Frank, reflecting the sector’s expansion globally. Last year, Citadel and its market-making sister firm, Citadel Securities, pre-let a third of twin City towers due to open in 2027—a major expansion of their London footprint.
Another cohort expanding in the Square Mile: U.S. law firms. They are seeking to capitalize on a resurgence in deals involving British companies, and to work with fast-growing private-equity clients.
Patrick Sarch, a partner at White & Case, said his team of mergers and acquisitions lawyers is growing to keep up with activity, driven in part by U.S. buyers looking for bargains in the U.K. market. The New York law firm took on two more floors of its office building in the City two summers ago.
“Our lawyers are busier than they have been, ever,” Sarch said. “We are hiring partners, baby lawyers out of law school, people in the middle. There is a war for talent in London.”
