£4.5B Broadgate’s Overhaul Mirrors The Changes Sweeping Through London
LONDON — Does any development better encapsulate the change in London and property than Broadgate?
A decade ago as the financial crisis got into full swing, the 4.7M SF, 32-acre campus in the City of London contained 98% offices, almost all of which was let to financial services firms who had flocked there after it was built in the 1980s, drawn by big floorplates and fortress-like architecture.
Under a new vision outlined by owners British Land and GIC this year, that is going to radically change.
Broadgate's evolution mirrors what is happening in central business districts across the world, as traditional offices are converted into mixed-use schemes that more closely fit what modern urbanites want from cities.
The £4.5B scheme will be extended to 6M SF over the next 10 years, of which 750K SF or more will be retail and food and beverage space.
A further 750K SF will be other alternative uses, and for the first time asset manager British Land is thinking about putting residential in the scheme, possibly in the form of serviced apartments, Bisnow can reveal.
The first stage of the process is underway, with three office buildings totalling 1M SF being redeveloped into a mix of offices and retail.
Offices will still dominate the scheme, comprising 4.4M SF, but the companies that occupy those offices are already changing. Out have gone financial services firms like ICAP, and in are coming a larger number of smaller firms, many of them tech-focused, such as cloud-security firm Mimecast, reflecting the way London has expanded its expertise beyond finance and become the tech capital of Europe.
“This is more than a rebrand,” British Land Head of Broadgate David Lockyer told Bisnow. “Broadgate had to change, and with our development programme we’ve got the chance to do that.”
Two incidents in the years after the financial crisis underscored to British Land why Broadgate had to mix up its uses and tenant lineup, Lockyer said.
One was Brexit, which brought into sharper focus how a reliance on financial services firms would be the path to decline.
But before that, the major catalyst was the move by Swiss bank UBS, which came out of 1M SF across four buildings in Broadgate and occupied 700K SF in a new HQ at 5 Broadgate built by British Land and then co-owner Blackstone.
“When you get 750K SF of space back, you ask yourself who is going to occupy that,” Lockyer said. “If you rely on your existing occupier base, you’re going to wait a long time, so you start to think about what sector and size of firms will form the new occupier base. Tech firms and small and medium enterprises are a more important part of the market, so you think about how you can capture that.”
Lockyer said Broadgate was trying to utilise its position on the “fold” between the City of London and Shoreditch to appeal to fintech firms like mobile-only challenger bank Starling, which has taken 14.5K SF at 2 Finsbury Ave. The building was one of those previously leased to UBS. Longer term, British Land will undertake a major redevelopment of the 563K SF 2 and 3 Finsbury Ave., but in the short term it has refurbished the space and leased it to a larger number of smaller firms on shorter leases.
British Land has installed its coworking brand Storey in the building as well as the Appold Studios building, and the ground floor area epitomises the change in attitude to the office stock at Broadgate.
Gone is the corporate reception of UBS days, and in its place is The Nursery Theatre, an arts charity for young people focusing on improv theatre which is partly funded by Broadgate. The organisation also runs a café and deli.
Storey occupies 58K SF in Broadgate, and while British Land did not provide occupancy figures for Broadgate, a similar facility at its Paddington scheme is 77% let. The brand focuses on firms of 20 to 70 people which Storey co-leader James Lowery describes as either small companies in the scale-up phase of their development or small teams from larger existing British Land tenants.
He said about 50% by area of the tenants in the space are existing tenants. The brand offers leases of one to three years and the average lease length is 28 months.
In terms of the wider change of use from offices to retail and restaurants, a recent letting deal sums this up. Royal Bank of Scotland is exiting 325K SF at 135 Bishopsgate as the state-owned bank scales back its operations.
Rather than finding office occupiers for the entire building, British Land leased 42K SF across the ground and first floors of the building to Eataly, the Italian food hall business that started in Turin which now has 40 outlets in 12 countries.
“We wanted to make Broadgate a destination for people who don’t necessarily work in the area,” Lockyer said.
Beyond this, the current 100K SF of retail and restaurants will rise to 350K SF by 2020, including 90K SF in the 520K SF redevelopment of 100 Liverpool St., another of the buildings UBS exited.
Further out, 1&2 Broadgate, a 305K SF building which becomes vacant in 2019, will likely see 100K to 200K SF allocated to retail, and this could be linked to the neighbouring 100 Liverpool St. to make a significant retail corridor. Overall it would make Broadgate the largest retail destination in the City.
Looking toward the end of its 10-year plan, Lockyer said that when leases expire in the office space at the northern edge of the campus, it will look at the possibility of converting this to serviced apartments or other types of residential, a practice once unheard of in the office-focused City.
When it was built in the 1980s, Broadgate was the physical embodiment of London’s Big Bang in financial services. Today it is again trying to mirror the wider changes in London: economically diverse, fragmented and with a love of good food and shopping.