Canary Wharf's £1.5B BTR Bet Pays Off

Canary Wharf Group’s build-to-rent division, Vertus, got off to something of a false start.

It came out of the gate hot with its first building, the 327-apartment 10 George Street, and completed more than 40 lettings in the first month. Unfortunately, that month was February 2020.

Today, Vertus Director of Operations and Leasing Freya Richard can look back at the early days of the pandemic as a bump in the road toward building one of London’s biggest BTR platforms, one that is now reaching the end of its build-out phase. 

“It feels like a bit of a distant memory now,” Richard told Bisnow in an interview at 50-60 Charter Street, the newest building in the Vertus portfolio. “The market is very different now. We're facing new challenges.”

The creation of a rented residential portfolio on the Canary Wharf estate was a major part of owner Canary Wharf Group’s strategy to diversify beyond the huge corporate office buildings with which it had been synonymous since its creation in the early 1990s. 

The team behind Canary Wharf, including Brookfield and the Qatar Investment Authority, began by building out a major retail and leisure offering, and residential was next.

Before the launch of Vertus, it hadn’t actually been possible to live on the Canary Wharf estate at any time in its 35-year history — if people told you they lived in Canary Wharf, they actually meant they lived in the surrounding parts of London’s former docklands. 

When the Vertus brand was created in 2019, Richard was part of an original team of four staff, along with Managing Director Alastair Mullens. Today, that team has more than 120 members.

That team manages a portfolio of three fully stabilised BTR properties — 10 George Street, 8 Water Street and Newfoundland — plus 50-60 Charterhouse Street, which comprises two towers, the first launched in September and the second launching in July, and 40 Charter Street, which will complete in January.

That BTR portfolio will total 2,445 units. Canary has also built 972 residential units for sale on the estate and 615 affordable housing units, meaning it will build about 4,000 homes in less than eight years.

The business also manages Vertus Edit, a 378-room aparthotel, which was pivoted from traditional BTR to give the area a more diverse offering. 

In a presentation to investors in September, Brookfield put the value of the Canary Wharf residential assets at $2.1B (£1.5B), without specifying exactly which buildings the figure related to. 

The stabilised assets have a 95% occupancy rate and a 60% tenant retention rate, Vertus told Bisnow. 

Richard said that in some ways, the occupier profile was as expected — a big cohort in its 30s, with average income skewing higher because it is a premium product. A studio at 50-60 Charter Street starts at £2,651, and rents at the Newfoundland tower rise as high as £9K for a three-bed apartment. 

But where those people work and previously lived has been a pleasant surprise, she added. 

“When we launched, about 150,000 people came to the estate every day to work,” Richard said. “With an initial portfolio of 1,137 apartments, we thought, ‘Great. We’ve just got to convert 1% of those.’”

The expectation, both internally and externally, was that almost all of the people who rented from Vertus would work in Canary Wharf as well. In fact, the long-term figure is between 25% and 35%. 

“We're clearly converting a good chunk of people from other places, which is a huge success story for us,” Richard said.

Rental growth has slowed after the post-pandemic boom, Richard said, and has settled in the low single digits per year bracket. The new Renters Rights Act, under which tenants are no longer held to fixed tenancies, means some tenants have shopped around for better deals on rents elsewhere, but it hasn’t had an impact on occupancy, she said. 

When 40 Charter Street completes next year, the Canary Wharf residential portfolio will be fully built, and there are no imminent plans to build more residential on the estate, Richard said. 

The focus will be on leasing up newer assets and continuing to maintain the tenant experience across the portfolio. 

The new 50-60 Charter Street’s amenities include a gym and reformer Pilates studio, private dining rooms and kitchens, games room and cinema rooms, as well as coworking facilities and an outside terrace. 

Richard said Vertus honed its resident amenity offer in recent years — the initial resident platform, Club Vertus, has been replaced with a new app called Vertus Plus. It better allows residents to plan ahead and book onto events the company provides, as well as provide feedback on what kind of event they want more of.

Wine tasting and wellness events — not at the same time — are popular with residents, as are educational events that allow residents to learn new skills, from wreath-making to business-focused sessions. 

As part of an estate with hundreds of shops, restaurants and leisure offerings, Vertus doesn’t feel the need to keep residents in the building, Richard added. The company is equally happy sending people to other facilities in Canary Wharf. 

Richard has the attention to detail that marks out heads of operations. She joined some of the running clubs put on by Vertus to gather feedback from residents, and as she toured Bisnow around 50-60 Charter Street, she made notes of issues that need addressing.

“The team don’t love [her and Mullens] that much because we send lots of emails after we've had a walk around,” she said. “But those things are really important — we recognise we are at the premium end of the market.”