BUSINESS WATCH

The Reichmanns strike again

Peter C. Newman August 29 1988
BUSINESS WATCH

The Reichmanns strike again

Peter C. Newman August 29 1988

The Reichmanns strike again

BUSINESS WATCH

Peter C. Newman

The audacious Canary Wharf project, pulled into existence by the Reichmanns, gets its elevators this week. That contract, the largest in British history—for the United Kingdom’s tallest skyscraper—is a small part of one large-scale enterprise. The more than $7 billion that the family will eventually spend on the 71-acre site ranks it as the world’s largest current construction undertaking. When completed, some time in 1996, Canary Wharf will add 12 million square feet of office and shopping space to London. If it is fully occupied, that would be enough to shift the centre of gravity of the British capital’s financial district, adding nearly 15 per cent to London’s available financial real estate. The U.K. project will have far more effect on its urban environment than the Reichmanns’ $1.8-billion World Financial Centre project in Manhattan.

Some critics of the project have said that it is too grandiose. “I think it will work,” M. J. Rivett-Carnac, managing director of Baring Bros, merchant bankers, told me. “But it will go slower than people have anticipated. Still, since it’s the Reichmanns’ own money, and they have no shareholders to pacify, they can afford to take the long view.” Paul Reichmann himself acknowledges little risk in the megaventure. “When we first moved our development operations from Toronto to New York,” he said, “I was amazed at the ability of that marketplace to absorb major changes over two or three years. We were able to construct and lease some eight million square feet in the World Financial Centre. In the past decade, more office space has been built in Manhattan than exists in all of London. It is only in the past three or four years, with the growing entrepreneurial spirit and confidence in the British economy, that changes of that scale and pace have begun to occur in London.” Canary Wharf planners are creating not only new buildings but a new urban environment. Said Reichmann: “We

wanted to establish the appropriate relationship between the great public spaces, the miles of internal roads and treelined boulevards and waterfront promenades, and the water itself, and to be convinced that the relationship between buildings and public spaces, which hold together the entire project, were appropriate.” The project manages to echo the atmosphere of such London

landmarks as Trafalgar Square, Belgravia Square, a treelined avenue reminiscent of The Mall, an open piazza with Britain’s biggest fountain since the Victoria Memorial was built outside Buckingham Palace in 1911, and an open space that will borrow the theme of the paths, water and plantings of Hyde Park and Kensington Gardens.

The first phase of the project, which will become its heart, is already about 20-per-cent leased, with the British

headquarters of Morgan Stanley and Credit Suisse First Boston as anchor tenants. “We expect to offer space at about half the cost that a tenant would pay in London’s financial district,” said Charles Young, the project’s U.K.-based executive director. “Also, since the project lies within the London Docklands Enterprise Zone, nearly everything can be written off in the first year after construction, and tenants may also be eligible for significant tax benefits.” The first midrise buildings are due to be oc-

cupied in late 1990, while the 50-storey tower will begin to fill up eight months later. Canary Wharf, situated on the formerly derelict Isle of Dogs, will eventually encompass 24 buildings, including

500.000 square feet of new retail, hotel, dining and leisure space.

There will be up to 6,500 parking spaces and there is about to be a public hearing to decide on whether the government should approve a new tunnel that would extend the existing highway from the City directly to Canary Wharf. The project’s impact will be so immense that two new bridges across the Thames have also been approved to handle expected traffic. “We’re sitting only about 2V2 miles from the Bank of England,” said Young. “And another advantage we have is that because there are about

36.000 London structures listed for historic preservation, it has become hard to gather any significant real estate parcels within London. Yet the estimated requirement for office space over the next 20 years is in the neighborhood of an extra 100 million square feet. We estimate that perhaps half of that can be provided by redevelopment of the City’s traditional areas. After that, there is nowhere else to go but Canary Wharf and the docklands.”

Canary Wharf’s weekday population (including considerable growth in surrounding areas) will eventually top 100,000. As well as new bridges (and quick access to the new city airport which will feature, when finally approved, Canadian BA-146 jets that will range over most of Europe), Canary Wharf will be reachable by a new light railway transport system, fast ferries and the extension of the existing Underground. The Reichmanns are contributing $150 million toward the building of an extension from the existing station at the Bank of England, and construction is ahead of schedule.

An analysis of Canary Wharf’s prospects shows that it is a typical Reichmann project: once its imaginative elements are in place, its success seems guaranteed, and the only puzzle is why someone didn’t think of doing it long ago. Prime Minister Margaret Thatcher caught the spirit of the occasion when she officially opened the project earlier this summer. “I congratulate the Reichmanns and thank them for their faith in Britain,” she said. “Perhaps the most thoughtful and wonderful touch is that the whole thing is aligned so that you will still have a view of St. Paul’s—and that appeals to us a lot.”