The 44 storey HSBC global headquarters in Canary Wharf London is back on the market in a sign that demand for corporate property is returning to the UK in style. This is a property which has changed hands on numerous occasions in years gone by and is set to become the U.K.’s most expensive office building.
The building itself is situated in the famous Canary Wharf region of East London offering 1.1m sq ft spread over the famous 44 storey property. In many ways the HSBC head office reflects the current and future of the UK office market with its chequered history and its ongoing increase in value.
The history of the HSBC head office
Despite the fact that there have been various changes in the European banking community, leading to greater regulation and higher costs, HSBC is adamant that it will not be moving its head office back to Hong Kong. It is interesting to note that the property which now houses the head office of HSBC, one of the largest banks in the world, was built and designed on behalf of the company in 2002 with Foster & Partners playing a prominent role in the venture.
Quote from PropertyForum.com : “These three terms are the nightmare of real estate buyers around the world and with the United Nations confirming that recent worldwide population growths forecasts are wrong, there is going to be further limited supply, growing demand and governments will take advantage of this.”
HSBC decided to sell the property to Spanish property giant Metrovacesa for a record £1.1 billion only for the Spanish operation to hit the financial buffers and HSBC take back control in 2008. The next owner of the property was the South Korean national pension fund NPS which acquired the building for £800 million. This is the current owner of the HSBC tower now looking to raise in excess of £1.1 billion to fund other opportunities in the worldwide real estate market.
Why is the HSBC head office so attractive?
One of the main attractions of the HSBC head office building is the fact that HSBC has a 13 year lease which contains an annual upwards only inflation linked rent review. So while the value of the property will fluctuate with the market, the rental income will continue to grow year-on-year by inflation, thereby retaining the real value of the rental income going forward. The fact that the company has also committed to its London head office for the foreseeable future is obviously another major plus point which has not gone unnoticed by investors.
Many believe that the emergence of the HSBC head office building on the real estate market could prompt further asset swaps towards the top end of the office rental market. In many ways this reflects the current direction of the UK economy as well as the very strong local real estate market. It will be interested to see the final takeout price for the property which is expected to be well in excess of £1.1 billion.
Is this the top of the market?
We may well look back in years to come and point to the sale of the HSBC head office building as the short-term pinnacle of the UK real estate market. However, this could be just yet another stage in the ongoing development of the UK office market which is certainly picking up strength in the short to medium term.