HSBC Will Take Smaller London HQ — And Pay Less For It
London’s second-largest private sector corporate tenant is set to follow in the wake of big occupiers like Clifford Chance and take much less space in its future global headquarters, Bisnow can reveal.
HSBC is reviewing its options ahead of a 2027 lease expiry at its 1.8M SF HQ at 8 Canada Square in Canary Wharf. And it is planning something much smaller, which will significantly reduce its property costs.
“On both I can say no,” HSBC Managing Director Esra Fanoscu told the audience at Bisnow’s London State of the Market event at Ashby Capital’s The Kensington Building last week, answering a question about whether its new HQ would be the same size and whether it will pay the same amount.
“Our occupancy rate is around 40 to 50%,” Fanoscu said. “In the future, we don't think that this will significantly change, because we were already embracing hybrid work. So we're looking for something much smaller.”
A memo to HSBC London staff from Chief Operating Officer John Hinshaw in September said the bank was undertaking a review of the “best future location in London for our global headquarters”, Bloomberg reported.
The memo added that the bank was moving teams around in the building to reduce the space it occupied by a quarter. The bank had previously said it wanted to cut its global property footprint by 40% from 2019 levels.
“Our CEO explained publicly last year that we will be staying with hybrid,” Fanoscu said. “So we're not mandating any of our colleagues to come back. But there is a natural comeback already, and most of our colleagues returned either two days or three days a week, which we're fine with.”
Fanoscu would not comment on whether HSBC would be leaving Canary Wharf, where it has rented 8 Canada Square since 2002, saying no decision had yet been made and that staying in the Docklands estate remained an option. Its building was bought by the Qatar Investment Authority in 2014 for £1.1B. It is the second-largest non-government occupier in London behind WeWork.
Global law Clifford Chance last month announced it was leaving Canary Wharf for the City, and taking a new HQ less than half the size of its previous 700K SF building.
Fanoscu did give an insight into what it was looking for in an HQ that will be fit for the future.
“Canary Wharf is still an option,” she said. “And all the other options will also be considered, based on the demographics of our colleagues, based on all the tech-related availability of a building, floorplates, lighting. The resilience of the building is also another important point for us.
“It's not just only the energy and ESG, these are no-brainers from a certification point of view. But how resilient is the building? That's also another very, very important criteria for us.”
She added that flexibility in terms of being able to change the layout of a floorplate or parts of a building would be increasingly important in future, as the way its staff work will change more rapidly than in the past.
“It’s extremely important because we really like to test and learn,” she said. ”So our colleagues and our seniors are quite excited about testing new design, testing this, testing that, so that space should also allow us to do all these changes.”
In the past 18 months, Fanoscu said, HSBC had learned some valuable lessons about how its staff were working in the wake of the pandemic, which it will be taking into plans for its future HQ. One lesson showed a cliche of office real estate isn’t as true as many believe.
“We learned in the last 18 months that offices are not only for collaboration, people still come in for individual work,” she said. “So we need to find the right balance for them. And we also realise that there are some changes in behaviour in our colleagues: 30% of our colleagues, for example, during Covid moved to outskirts of London, and they have changed their lifestyles. And we need to also think about how how this will shape our office design and office activities.”
Another major occupier at the event also gave an insight into what they looked for in a recent office move, proving some things never change: the desire for light, big floorplates and good transport links.
‘I would say that the natural light, it’s a glass cube,” Capital Group Office Services Senior Manager Jo Marsh told the event audience.
The investment manager recently signed to take 110K SF at Sellar’s Paddington Cube scheme.
“So it comes with lots of natural light, it's got really usable floorplates, that was a real attraction for us and the size of the floorplates as well," she said. "One of our business imperatives was that we didn't split a business unit across multiple floors. So the fact that the floorplates are circa 20K SF was just really attractive to us."
Marsh added the connectivity of the site, which sits atop Paddington Station, was another draw: "It's got pretty much every main line coming in to that transport hub, and then you have the Elizabeth line, as well, that’s a massive attraction.”
Large occupiers pre-letting space in new buildings want to be involved in a conversation with landlords at a much earlier stage to collaborate on the amenities a building can offer, Marsh said. At Paddington Cube, she cited common space that had been earmarked as meeting rooms, which the firm’s staff would never use. Instead, Capital Group Office Services suggested a wellness and fitness centre be installed.
“All I would say is that it's all about partnership between landlords and tenants,” Marsh said. “It's not about how it used to be, where the landlord just fitted out space and said, 'there you go, that’s what you get.' It's got to be in collaboration with the tenants, because ultimately that will make life easier for both of us in the longer term, and how we operate the space longer term.”