HSBC already fears new downsized London HQ will prove too small

HSBC Holdings is still two years away from a planned move to a smaller City of London headquarters, but executives are already concerned the space will not be big enough and are considering taking up more even before relocating.

The bank is weighing whether it will need to lease additional space beyond the 570,000 square feet (52,955 square metres) it will be renting on Newgate Street, where Orion Capital Management is overhauling the former headquarters of BT Group, sources with knowledge of the matter said.

Europe’s largest lender, which initially signed up for most of the space in the project last year while retaining an option over the remainder, has since exercised that right, committing to the entire space, the sources said, asking not to be identified discussing non-public information. Even that additional area may not be enough and HSBC could take up space in another building to meet its needs, they added.

Deliberations are at an early stage and there’s no certainty the bank will lease additional space outside its new headquarters, the sources said. A representative for HSBC declined to comment.  

The potential up-sizing is the latest sign that pandemic-era projections about shrinking office footprints are being challenged by the gradual return of a majority of workers to offices and the increasing need for companies to provide top-quality amenities for their staff.

HSBC currently rents 1.1 million square feet at 8 Canada Square in Canary Wharf and the move back to the City – announced last year – represented a near halving of its headquarters footprint as part of a wider plan by the bank to slash as much as 40 per cent of its global real estate.

Pandemic-era uncertainty

The bank is one of several major companies in London that agreed to deals in London during the pandemic and its aftermath that would have represented substantial contractions but have since taken more space. In some cases, that was because leases were signed during the height of pandemic uncertainty with maximum flexibility in mind, allowing them to scale up or down. In other cases, companies have since expanded.

Clifford Chance is moving from its much larger Canary Wharf home to a smaller office at Great Portland Estate’s Aldermanbury Square project. The law firm secured an option to hand back the first four floors of the 321,100 square-foot development when it signed the deal, but has since decided it will need the entire building, sources with knowledge of the deal said. While its ultimate footprint will still be smaller than its current premises, the contraction is significantly smaller as a result, they said.

A representative for Great Portland declined to comment, while Clifford Chance did not immediately respond to calls and e-mails seeking comment.

“There has been a general shift towards occupiers being more considered about day-one space takes, with landlords in turn showing more flexibility in how they accommodate the future needs of their customers,” said Mike Wiseman, head of workspace leasing at British Land. “There are only a handful of high-quality buildings being delivered in the City over the coming years, and with firms increasingly taking up their option space, we are seeing an already supply-constrained market become even tighter.”

US law firms Latham & Watkins and Kirkland & Ellis have also taken on additional space – at the One Leadenhall and 40 Leadenhall Street projects, respectively.

Another law firm, A&O Shearman, has signed up for an additional 100,000 square feet of space at One Broadgate development, where it initially took up 254,000 square feet, the project’s developer British Land said in a trading update last month. That expansion was driven by the recent merger of Allen & Overy with Shearman & Sterling. BLOOMBERG