Europe's biggest office sale in four years boosts London's Canary Wharf

By Iain Withers

LONDON, July 1 (Reuters) - Barclays' £750 million ($993 million) acquisition of its London headquarters marks Europe’s biggest office deal in nearly four years, offering a potential boost to Canary Wharf after a prolonged slump in investment activity.

The former Docklands area became a symbol of the global office property downturn after demand fell in the wake of post-COVID home working, prompting high-profile tenants such as HSBC to leave.

While lettings in Canary Wharf have picked up, boosted by companies ordering staff back to the office and a shortage of high-quality space, until the Barclays deal no properties worth more than £50 million had been sold in the area for more than two years, according to MSCI data.

Investors and property agents said they hoped the Barclays deal might thaw the local market, while others cautioned high borrowing costs and political uncertainty could keep activity in check.

"When anyone deploys that scale of capital in a major gateway city, it's encouraging", said Richard Bloxam, CEO of capital markets for property agency JLL, adding it reflected a pick-up in sales for major offices globally, including in Europe.

Several properties in Canary Wharf nonetheless remain in limbo, including 5 Churchill Place, which has been in administration since 2023.

BLACKSTONE SHELVED SALE PLANS

Blackstone in recent months paused talks to sell its nearby Cargo office building after conflict in the Middle East soured market conditions due to higher borrowing costs, a source familiar with the matter said, adding the Barclays deal could improve conditions. Blackstone declined to comment.

One major property investor, declining to be named, said political uncertainty in Britain after Prime Minister Keir Starmer resigned had also dampened wider activity, with two deals shelved pending clarity.

Landlord Canary Wharf Group, joint-owned by Qatar's sovereign wealth fund and Canadian investor Brookfield, said it would reinvest the proceeds from the sale of the Barclays tower.

Canary Wharf's multi-year transformation includes a planned revamp of HSBC's soon-to-be-vacated tower and building more flats, restaurants and laboratories.

There are signs of progress, with the latest office vacancy rate for the wider Docklands area falling to 18.1% from a peak of 19.1% in early 2025, according to CoStar data, although it is higher than in the city centre.

The sale price for Barclays' tower - at about £750 per square foot - also indicates a discount to the City, where space would go for between £800 to £1,200 per sq ft, said Chris Gore, principal at property agency Avison Young.

Barclays said the deal will give it long-term certainty over costs, adding the acquired 999-year lease would mean savings on its existing much shorter lease and it would be neutral for capital and earnings. However, Gore said this structure may limit direct comparisons with other transactions.

($1 = 0.7550 pounds) ($1 = 0.8777 euros)

(Reporting by Iain Withers; Editing by Tommy Reggiori Wilkes and Louise Heavens)