How To Take A 'Soulless' Building In A Fringe Location And Create A Thriving 1M SF Office Hub Of The Future
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In London real estate development today, people often talk about being bold, taking risk and building in new districts, when what they mean is refurbishing an office on the edge of the City where rents are already £60/SF and Amazon and UBS have a building 400 yards away. There is that, and then there is what Robert Wolstenholme and Trilogy Real Estate are doing with Republic.
From the most unpromising of circumstances, Trilogy has created an office destination where about 200K SF has been leased and an existing scheme of 600K SF will almost double in size in an area that no one considered a viable office location. Bisnow can reveal a new 30K SF letting to Anglia Ruskin University, which has chosen the scheme as the location of a new business school.
How has Trilogy done it? It dug beyond initial impressions of a set of buildings and area and identified a location which should benefit from the changing nature of London, and cities more generally. It has applied creativity and chutzpah in its development of the Republic scheme, which will be the location of Bisnow’s all-day BOLD office event in September. Crucially, it has put in place the right financial structure. And now it is reaping the rewards.
When ex-Resolution Property partner Wolstenholme’s company teamed up with LaSalle Investment Management in 2015 and bought the four-building East India Dock office scheme in Poplar from Criterion Capital for £170M, most people presumed it would be knocked down and turned to residential. That had been Criterion’s original plan.
When it was announced it would be a major office redevelopment scheme, eyebrows were raised. The scheme is in a dense urban area, surrounded by existing flats and huge data centres, and Canary Wharf looms in the near distance. But it did not scream out as a modern office location.
There are no other offices in the vicinity, and the site is not on any of the major tube lines. The buildings, built in 1992, were the archetype of boring 1990s design. “A bit corporate” Wolstenholme’s architect friend, the late Will Alsop, told him.
“It was soulless and boring,” the man himself freely says today.
But Wolstenholme looked beyond this. Poplar is the fastest-growing ward in the Tower Hamlets, the fastest-growing Borough in Britain, he pointed out.
“When you got here all you could see everywhere was cranes. The population of London is shifting east,” Wolstenholme said, as a testament to the amount of residential development ongoing in the area. Some of that is posh flats for Canary Wharf workers, but a lot of it is affordable and will be occupied by the creative workers that are flocking east, he said.
Those big, nondescript data centres it sits next to are there for a reason: The London Internet Exchange, one of the main conduits for internet traffic from the U.S. to Europe, sits beneath the building, giving the area great digital connectivity.
It is on one of East London’s cycle superhighways, a boost in a world where young workers increasingly cycle to work. And a change after one stop on the DLR gets you on the Jubilee Line and to Waterloo in less than 20 minutes. When Crossrail (eventually) opens Bond Street will be less than 30 minutes away.
“You had 600K SF of really soulless and boring offices, but I thought we could switch it on,” Wolstenholme told Bisnow on a tour around the site. “I thought we could take this fringe building and make it a place that the digital nomads want to come, the worker and the company of the future.”
The redevelopment of the scheme is taking place in phases. The first phase involved two office buildings that totalled 400K SF, which through a major refurbishment and renovation have been increased to 500K SF of gross lettable area, and rechristened the Import and Export buildings, as a nod to the shipping heritage of the nearby former East India Dock.
Import, which has 274K SF of office space, is open, and following the deal with Anglia Ruskin is 60% leased. Other tenants include Deliveroo, digital agency Threepipe and a municipal agency of employment tribunal judges which was in place before the redevelopment and loved the overhaul so much it decided to stay. Coworking operator the Trampery occupies space, bringing with it an expertise in creating communities in off-pitch locations.
The target is companies that are priced out of Shoreditch, where rents for new space can be £50/SF or higher. What was once London’s tech heartland has become “a victim of its own success,” Wolstenholme said.
The second building, Export, has 179K SF of office space, and will be completed around the turn of the year, and Wolstenholme said there is some interest in the space already.
Trilogy has brought to Republic all of the elements that one would expect to find in modern office schemes across London — its ethos is very much in tune with the zeitgeist. One of the tenants is Puregym, and there is also space that can be used by tenants for yoga classes, and part of the underground car park has been converted to bike space and showers.
The building features a library, a boardroom tenants can use and also events and terrace space on the top floor, which has views back to Central London which Wolstenholme compares to the vista of New York from the terrace of the Whythe Hotel in Brooklyn.
Cafe The Gentleman’s Barristas provides the artisan coffee which seems to now rank just below food and shelter in Maslow’s hierarchy of needs for the modern office worker. A new restaurant, Horticulture, which will feature locally sourced food and an on-site garden, will open soon, and help to give the scheme a buzz at night as well as during the day. Wolstenholme said that is key to engaging with both tenants and the local community. A community engagement team organises events for tenants and liaises with them on what they want from the scheme, and the property has hosted music events to boost that night-time economy.
But a central appeal of Republic is the price: with rents at £35/SF, the building can undercut competitors in London satellite towns like Reading or Slough, let alone other Central London markets, Wolstenholme said. And to keep rents that low, effects have to be achieved in a creative, innovative way.
A prime example is the building’s exterior. Gone is the bland facade, in has come a bright, multicoloured design created by Tom Hingston and Embrace Building Wraps. Hingston has directed videos by David Bowie and collaborated with musicians like Massive Attack — he produced the artwork for their famous Mezzanine album. Without knocking anything down and with only the addition of what amounts to wrapping paper, the facades of the first two buildings have been transformed.
“We wanted to do something to really switch the building on, and we thought about drapes or banners, but you need planning permission to do any of that,” Wolstenholme said. “But you don’t need planning permission to put stickers on the outside of the building, so away we went. And it worked. Threepipe was our first new tenant, and the founder lives in the Docklands. His wife saw the building and asked, what’s that? He looked into it and they became our first new tenant.”
The central atrium has been opened out and refurbished in cross-laminated timber, a cost-effective material that is environmentally friendly and also forms a soft, natural counterpoint to the glass and steel towers of Canary Wharf.
“Broadly speaking, our all-in price with development costs is about £350/SF. If we can let it at £35/SF that is a 10% yield on cost,” Wolstenholme said. “We are on course to get that in terms of rents, although it is a bit slower than we hoped. For our investors, a return of 9-10% is pretty good: They are maybe getting 6% on their existing assets, and they don’t want to take opportunistic risk to try and get to 18-20% returns.”
The financial structure is key to making a project like this work. Wolstenholme said the scheme was bought and is being redeveloped without debt, which removes the pressure to let the building quickly and at a certain rental level. LaSalle put together a club of investors to fund the first phase, and it is yet to be determined if the same investors will fund the redevelopment of the third and fourth buildings.
The extension of those two office buildings, which currently occupy about 200K SF, could be significant, with the fact that surrounding towers go to 34 storeys meaning later phases could probably be built higher. This later phase of the redevelopment would be far more mixed-use and could include co-living space, hotels and data centre space, tapping into that underground digital connectivity.
It isn't just the real estate zeitgeist that Wolstenholme and Trilogy are tapping into with Republic; it is a wider desire for cities like London and the people who live there to be open, welcoming and outward-facing.
“One of our tenants is a mobile phone technology company, Lebara, which works with a lot of African customers. They love how multicultural this area is. We are right by the Thames, and this is where immigrant populations have always come — the Jews, the Huguenots, they landed and settled here, and more recently the Bangladeshi community. This is the home of immigration, and immigrants are communities that foster innovation and creativity and entrepreneurship. We want this to be a truly multicultural community, with people from all over the world working together. They said, bring it on.”
With a wide variety of tenants steadily filling up the scheme, Republic is proving true to this egalitarian ideal, and making a decent return to boot.