Never underestimate the media’s ability to blow things out of all proportion.
The London riots have been front page news from Los Angeles to Shanghai, but in a few cases the reporting has gone a little too far.
The BBC’s monitoring service says Russian TV Channel Rossiya 24 cited Twitter in claiming that animals had been released from the London Zoo and that lions and tigers could be heard roaring on the streets. No wonder a contact in Moscow asked this week if PERE’s HQ in London was barricaded in. [For the record, we are based in London’s Barbican area – the violence started in Tottenham several kilometres to the north of us before popping up in pockets elsewhere in the capital. And no, London Zoo was not attacked!]
Of course, there is no denying that the riots have tarnished the image of London and physically damaged its fabric in the places where youths looted and set fire to buildings. Indeed, both PERE’s London-based correspondents woke up to several smashed shops in their local high streets and one returned home to find his apartment block boarded up.
However, the message from big business this week was more positive, which obviously is more important to global real estate investors. In the same week that looters made the news, Canary Wharf Group, whose investors include private equity real estate and sovereign wealth funds, announced a project to build a new office tower in London’s Docklands after the European Medicines Agency agreed to pre-let 250,000 square feet, bringing 1,000 direct and indirect jobs with it.
Not only that, but private equity real estate firm Delancey and Qatari Diar this week agreed to buy the athlete’s village at the 2012 Olympic Games Park in Stratford (whose high street saw some damage by rioters). The successful bidders are paying £557 million (€635 million; $905 million) to buy the village and its 2,818 homes and will manage it long term. There is potential there for another 2,000 homes.
Recently, there has been more news of significant investment. Canary Wharf Group and Qatari Diar also said they would redevelop the Shell Centre in London’s Waterloo area for £300 million. Oil giant Shell will take a 210,000 pre-let at the new development.
The heads of the companies involved in these transactions didn’t refer to looting, but instead talked of London being a long-term place to invest. For example, Shell’s UK chairman, Graham van’t Hoff, said: “The Shell Centre is our long-term home in London…The project would benefit the capital and local community.” Meanwhile, Delancey’s chief executive, Jamie Ritblat, said of the Olympic village: “This is a long-term project for us – we are looking to retain the neighbourhood and create a place where people will want to live, work and play for years to come.”
That said, there also was some slightly bad news this week. Standard Bank, one of Africa’s largest banks, said it would move the headquarters of its international operations from London to Johannesburg. But on closer inspection, this seems more to do with the bank’s desire to save $75 million per year for strategic reasons as it looks to refocus on its domestic market. It is not in response to gripes about London becoming less competitive (and certainly not because of ‘hoodlums’!).
More seriously, Bob Diamond, chief executive of Barclays, hinted to shareholders – but only hinted – that the bank could move its UK headquarters in Canary Wharf overseas if it did not like planned banking reforms. Apparently, he said: “It's not a question of whether Barclays wants to stay in the UK, but whether the UK wants Barclays to be here.” Standard Chartered and HSBC also are suspected of mulling a potential move.
However, many believe such things will never happen. Indeed, in April, an ‘insider’ close to British chancellor George Osborne suggested it was unlikely any bank would leave the country. “We take much of this with a pinch of salt,” the insider told the London Evening Standard. “Does anybody really think HSBC would want to go to China? There are all sorts of reasons why that isn't going to happen.”
At this stage, the hints of large London occupiers leaving London remain just that. What currently is happening on the ground suggests a different narrative. Yesterday, Richard Ellis said there had been an 8 percent rise on active office demand in Central London. Space under offer is at or above the 10-year average despite all the economic uncertainly going on in Europe.
We haven’t even mentioned how demand is so strong for upmarket London residential property that private equity cannot resist the allure. The latest to announce a scheme is Orion Capital Managers, which is plotting a £300 million project in Chelsea complete with a perimeter wall (presumably just in case looting returns to London?).
The real estate projects highlighted above are serious ones, involve substantial institutional capital and many years of endeavour. In contrast, the riots lasted four evenings and are showing definite signs of being over. London has not been swept off the investment map, thanks.