Bright lights back on at Canary Wharf

Canary Wharf, London. Photo / Supplied

One of the abiding images of the financial meltdown of 2008 will be that of the banker carrying a cardboard box full of his belongings out of the offices of US investment bank Lehman Brothers in Canary Wharf in London's East End.

That was on September 16, 2008 and, as the world's banking system stared into the abyss, the future for the big office block, shop and restaurant complexes towering over the Thames looked bleak indeed. At the time, there were fears it would soon resemble Longbridge in Birmingham after MG Rover closed, or numerous other desolate former industrial sites across the Midlands and the north of England. And many felt that Canary Wharf, which had become the gleaming symbol of the country's booming financial services sector throughout the Noughties, deserved to gather dust and crumble.

But fears of a repeat of previous recessions - during one of which construction of those glass towers ground to a halt - have proved wide of the mark. If anything, Canary Wharf is booming again.

Hamish McDougall, spokesman for the site's current owners, Canary Wharf Group, says that Lehman Brothers' 5000 staff accounted for less than 5 per cent of the total of 90,000 who work in the area. The Lehman tower is now part occupied by liquidators and lawyers winding the bank down - but also by staff from Japanese bank Nomura, which took on Lehman's European businesses.

"It is not just financial services down here. We have media groups, KPMG and ratings agencies," he says. "Five new restaurants, including a Jamie Oliver one, have opened here in the last six months and four new office buildings have opened."

The new offices have added around 7000 jobs to the district, replacing those shed by some of the banks. Retail and office space owned by Canary Wharf Group is pretty much full.

"Canary Wharf has been relatively insulated from the crisis because of its diverse client base," McDougall says. "And our shopping malls are doing well because they have about 90,000 people coming through them every day."

Work has also started on the Crossrail station that will link Canary Wharf to central London and Heathrow, as well as Essex, from 2017.

At Evans Cycles in the middle of the Canary Wharf development, business is brisk. "We are doing a roaring trade. Business took a hit for a couple of weeks, especially for top-end sales, when the Lehman thing happened, but since then things have picked up," says Craig Outhwaite, the store's manager. "Sales were up 30 per cent last year compared to 2008, partly due to some shrewd marketing but also helped by the Government tax break for buying bicycles."

There's a similar story at local estate agency Morgan Randall, which specialises in rentals. "Things were tough early last year when a lot of landlords either mothballed an apartment or tenants got really cheeky deals. I remember some flats that had let for 700 ($1600) a week were suddenly going for 500 a week," says lettings valuer Paul Read. "But now landlords are getting higher rents than before and flats are not hanging around on our books - they are letting immediately. Some landlords are even kicking tenants out and putting the flat on the market at a much higher rent."

The rentals side has benefited, he says, from the fact that fewer workers in Canary Wharf are prepared to buy an apartment because mortgage lenders are demanding much bigger deposits.

This is not an area of cheap bedsits, though: a typical two-bedroom flat close to the Wharf will let for 450-600 per week. And Read says he has a two-bed penthouse on the market for 1600 a week and a four-bedder for 3000 a week, or more than 150,000 a year.

"It was those sorts of properties we might have had big voids on last year, but now they are letting again. The more modest flats never suffered from voids particularly," says Read.

Within the banks themselves, things are also getting back to normal.

"This time last year things were terrible. The mood everywhere was awful and a lot of people lost their jobs," says an analyst at a major investment bank in Canary Wharf, who declined to be identified. "After Lehman collapsed you could suddenly get a place on Jubilee line trains and the restaurants and bars were much quieter for a while."

Since last March, when the stockmarket troughed and began a steady recovery, things have improved, banks are hiring again and bonuses are back - big time. "It is pretty much back to where it was in 2007," says the analyst.

So far, at least, the Government's bonus tax, and dark threats from some parts of the financial sector that they will relocate their offices abroad, have had little impact on the Wharf, where 98 per cent of all office space is let - although rents, like everywhere else, are down sharply. Barclays Capital, the investment banking arm of Barclays, this month extended the amount of floor space it is renting and extended its lease by 12 years to 2032, although the bank insisted this gave no indication about its future plans for occupancy.

The analyst says he is not unduly worried that the plans announced by President Obama to clamp down on investment banking activity in the United States would be copied in Europe: "We have little history of splitting up banks here like they used to in the US, and so it may turn out that more business comes to Europe if the US does go ahead."

Many observers also think that the talk of the financial sector decamping to Switzerland is just that - talk. A cluster of banks, accountants, ratings agencies and law firms in Canary Wharf is going to struggle to move en masse to somewhere that will give them the proximity and convenience that London offers - something that will further improve when Crossrail opens, they say.

And while the opposition Conservative Party has promised that it would emulate the Obama plans if it wins this year's general election, there remains a great deal of scepticism that it would actually do so. On the one hand, politicians want to prevent similar crises happening in the future, which will require tighter regulation. On the other, they know that the financial sector is a huge source of tax revenue - something they will be reluctant to stamp on too harshly given the appalling state of the public finances.

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