From the 30th floor of One Canada Square, the tallest skyscraper in the UK, you can see the rest of London spreading out into the distance in all its grime and splendour. It was here, in a slick boardroom, that the three top executives of Canary Wharf, a vast complex of office towers in the east of London, watched the terrorist attacks of 9/11 unfold on television.
There was Paul Reichmann, the sombre, softly spoken septuagenarian who had built the estate; George Iacobescu, its Romanian-born chief executive; and Peter Anderson, the American finance director.
All three watched in horror as New York’s Twin Towers collapsed – just yards from the World Financial Centre, another of Reichmann’s projects.
“The reaction was complete shock,” says one person who was there that day. “Paul didn’t say anything. Peter Anderson didn’t say anything. He looked sick.”
There was no immediate evacuation of Canary Wharf. Later, Iacobescu emerged defiant in public, admitting that many tenants were “traumatised” but predicting that attitudes to skyscrapers would not change. Still, he must have wondered whether the estate would be a target. In March this year a transcript was published of a supposed confession by the senior al-Qaeda leader Khalid Sheikh Mohammed saying he had planned to destroy “the Canary Wharf building” in 2003.
It is no surprise that the complex should find itself on such a hit list, given its status as a symbol of global capitalism. Still, Canary Wharf is a latecomer. As recently as 20 years ago, the site was a ruined landscape of abandoned docks on the Isle of Dogs, a strip of East End land wrapped within a tight loop of the Thames. (The East End has always been down-at-heel compared with the city’s western flank – as with other British towns over the centuries this is caused by the prevailing westerly winds. Put bluntly, genteel types did not want to be downwind from the working classes.) Construction began in 1988 and Canary Wharf now has 33 office blocks with 14m sq ft of office space. About 90,000 people work there, fed and entertained at 200 bars, shops and restaurants.
It is disconcerting to step out from the enormous atrium of Canary Wharf’s Underground station. You are in London, but there are few visual clues to suggest this. The smooth, gleaming towers, super-clean pavements and array of chain retailers makes it feel more like a North American city. The names of the main tenants are redolent of big global business, divorced from any one city or country: HSBC, Morgan Stanley, Citigroup.
In many ways, Canary Wharf is a lens on the changing British economy. Until two generations ago Britain depended on manufacturing and trade. Tonnes of freight came in and out of the country, shipped past the muddy banks of the Thames estuary to unload in the many wharves in the East End.
The introduction of container shipping in the 1960s strangled freight trade up the Thames. The large ships could not travel any further upstream than Tilbury, 26 miles to the east. An estimated 150,000 workers lost their jobs in the docklands between 1967 and 1977. The noisy docks fell silent and physical decay set in.
Former deputy prime minister Michael Heseltine recalls flying over the area in the 1970s. “It was devastation,” he says, holding forth from behind his desk in the Hammersmith headquarters of Haymarket, his publishing company. “There were swathes of undeveloped, often toxic land.”
Back in 1979 and recently appointed secretary of state for the environment, Heseltine’s top priority was to set up a development corporation for the East End. Civil servants were underwhelmed. The revival of the docks seemed an uphill, thankless task. But pushing private investment into the area appealed to the go-getting instincts of the new prime minister, Margaret Thatcher. Heseltine chuckles as he recalls how he told her that the local councillors were mostly “communists”; in other words, nothing would get done unless central government intervened. This was enough to persuade Thatcher.
He admits he had no idea what would emerge. “If I’d said, ‘Prime Minister, in a decade or so we’ll have one of the world’s greatest trading financial centres, an airport, and an extravagantly large high-quality exhibition centre,’ they would have locked me up.”
George Iacobescu is one of the few people to have been at the heart of Canary Wharf from day one. He was an executive at developer Olympia & York in the 1980s when the project first came to the attention of his boss, Paul Reichmann.
Reichmann, an Orthodox Jew who speaks in a whisper, fled Austria with his family in 1938 and built an enormous real estate empire from Canada. (He spent about 10 years in Algiers en route.) He and his two brothers created the World Financial Centre in downtown Manhattan in the 1980s, when the city was in a serious real estate slump. He hoped to repeat that success at Canary Wharf, where he saw an opportunity to build high-quality offices cheaply. But the location was a problem – at the time, the Isle of Dogs was seen by most Londoners as the boondocks.
Iacobescu was an engineer and also a refugee of eastern Europe – in his case growing up in the dark days of Ceausescu’s Romania and emigrating to Canada in 1975. From his offices high in One Canada Square, where he barely picks at lunchtime sandwiches, you can see the problem of distance: the City, London’s traditional financial centre, looms miles away, up the Thames. At 61, Iacobescu, a tall man with a hawkish face behind thick glasses, still talks in a lilting and heavily accented voice. “The first phase was 4.5m sq ft, they said we were crazy, and we probably were crazy, but it was the problem of transport that was lethal.” At the time, transport links to Canary Wharf were primitive, with the only rail link – the Docklands Light Railway – widely dismissed as a joke. The Jubilee Line underground extension was supposed to arrive in the early 1990s; it wasn’t completed until 1999 (£1.4bn over budget). Bankers, meanwhile, were not keen to move away from the pubs, restaurants and shops of central London.
Distance wasn’t the only headache. Construction of the complex’s early skyscrapers coincided with a brutal downturn in global property markets, damaging the value of Olympia & York’s $20bn empire. The group went bankrupt in 1992. In 1993, Canary Wharf was bought by the project’s construction lenders, who managed to secure several important lettings. Three quarters of the space was let by 1995, when the Reichmann brothers bought it back for £800m, a knock-down price.
Even then, the success of the project remained questionable. Mike Hussey, Canary Wharf’s head of leasing at the time, recalls: “There was 1.4m sq ft of vacant space, the market was not great. I wouldn’t say it was a ghost town but it felt sterile. But you could feel the potential as well.”
In time, the towers did fill up, and more were added. Wall Street banks moved in, along with some thoroughly British names: Coutts & Co, The Telegraph and Barclays. Iacobescu says 1999 was the tipping point, when HSBC and Citigroup both agreed to occupy giant skyscrapers on the site.
Things may have turned out differently had it not been for the ingrained attitudes of the men who ran the City of London Corporation – the organisation that decides planning policy in the City. The maze of streets around the Bank of England had been the essential location for banks and insurance groups for so long that few believed this could change. And when it came to big planning decisions, the corporation often acted to protect the heritage of the Square Mile.
Throughout the 1980s and the early 1990s this was frustrating for many banks that wanted vast trading desks, particularly after the Big Bang deregulation of London’s financial markets in 1986. Iacobescu says the City’s office stock at that time was “90 per cent obsolete”, while Canary Wharf’s huge, high-specification buildings offered modern and flexible office space. In time, and against the corporation’s expectations, the banks migrated east.
But the success of Canary Wharf has not visibly damaged the City. Rather, it may have helped London maintain its position ahead of Frankfurt or Paris as the European business capital – which in turn has boosted business in the Square Mile. Michael Snyder, chairman of policy for the City of London Corporation, says it’s not a competition between the two sites. But he points out that 340,000 people work in the City, nearly quadruple the number in Canary Wharf. “If anything, we’re expanding faster,” he says. “And our buildings are somewhat more interesting ... the City has a more English feeling, a more British feeling.”
When I relay this comment to Iacobescu, he looks uncomfortable for the only time in our interview. His concise manner of speech gives way to rambling. Canary Wharf is a magnet for local shoppers at weekends, he says. It hosts hundreds of events. It takes its responsibilities to local people seriously. A colleague interjects that Canary Wharf is “more international”. Iacobescu disagrees with him as well as with Snyder. “Geographical locations don’t mean a lot in today’s world. Canary Wharf in 500 years will have as much history as the City of London ... Canary Wharf is part of the City.”
Beyond Canary Wharf’s northern boundaries, the complex seems to stop dead. A stroll past a pub and Cineworld Cinemas takes you to a flyover, strewn with rubbish, then a major road. And suddenly you are in east London proper, complete with tired council housing and drab parades of newsagents, laundrettes and bookmakers. Kids in hoodies linger outside a fast food takeaway.
Pushing a pram along the high street is 23-year-old Emma Hand, her blonde hair scraped back from her face. She says she likes Canary Wharf. “You can shop there, it has a Gap For Kids and Topshop. It’s closer than Stratford or Lewisham. I’ve been over there now and again for a drink or something to eat.”
Other locals are less enthusiastic. Victor Welch is a full-time carer to his wife, Margaret, who is in a wheelchair. The couple, who have been in the area for 35 years, live on Limehouse Causeway. “When you go around Canary Wharf, all the people there are so snooty, they won’t get out of the way,” Margaret says. “They are always knocking into you because they’re thinking about number one.”
Developers often talk about a “ripple effect”, where projects send out waves of change into the surrounding community. This is true to the south of Canary Wharf with its “lifestyle” luxury flats offering waterside views; but not to the north. Tom Dalgleish, a banker taking a cigarette break outside one of the Canary Wharf towers, confides that he spends little time there because of its “insular” environment. “It is very much a wrong-side-of-the-tracks divide between the estate and everywhere around it,” says Dalgleish. “Everything seems to stop just a few hundred yards away. They try to come up with community schemes but it is still very ‘them and us’.”
Iacobescu concedes that there are still barriers between the estate and its neighbours. He is hoping that further developments may allow Canary Wharf to “taper” into its surroundings, eventually. The 2012 Olympics will be one test; the Games will take place two miles north of Canary Wharf, and many hope they will regenerate the entire East End further.
Most of the big companies which relocated to the area brought their staff with them. But as more hotels and retailers move to the estate, job possibilities are opening for locals, according to Jim Fitzpatrick, MP for Poplar and Canning Town. Unemployment in his constituency stands at 9.5 per cent – triple the national average. One in five residents is Bangladeshi.
In the 1980s there were protests against the development – 30 sheep were released by locals to disrupt the groundbreaking ceremony – but resentment has been at a low level. In fact, last year a delegation of Parisian politicians visited to glean tips on preventing further outbreaks of rioting in the French capital. They were amazed that there had been no such incidents at Canary Wharf, despite the obvious contrasts between rich and poor.
With the likes of Waitrose, the Marriott and the Four Seasons moving in, the complex is bringing in more jobs for locals, particularly through ventures that fit into jobs at Canary Wharf.
Local suppliers are encouraged to bid for work with Canary Wharf’s tenants (£436m of contracts have been won through one scheme) and local “watermen” – who operate barges – are employed to transport materials to development sites.
As well as providing jobs, Canary Wharf is immersed in a variety of other projects, such as sponsoring children’s football teams, training programmes and educational initiatives. “From day one, we wanted to work with the local community,” says Iacobescu. “We’d have been out of our minds not to when they will be our neighbours for the next 150 years.”
Questions remain about whether Canary Wharf has lifted the surrounding areas or whether it still is an isolated “citadel”. Ricky Burdett, professor of architecture and urbanism at the London School of Economics, takes the latter view: “They created a very elegant, very swish, office ghetto,” he says.
Burdett, the design adviser for the London Olympics, praises the speed at which Canary Wharf was built but says it is unlike other new developments that fit into the “fabric” of the city.
The estate has often suffered brickbats from the likes of Prince Charles, who famously asked whether the towers had to be quite so very big. Despite having employed Sir Roy Strong, the dandyish cultural historian, as an adviser, Canary Wharf is still seen by many as an alien slice of downtown America, transplanted on to English soil. While there are neo-classical pillars and arches on some buildings, the prevailing style has always been Big Business USA.
Some believe Canary Wharf would have been more appropriate elsewhere. Sir Stuart Lipton, the developer behind Broadgate, an acclaimed office complex on the edge of the City, says: “Canary Wharf is a wonderful environment for corporates, who can get certainty and quality of delivery, but looking back it is a great disappointment that it wasn’t done in the City.”
Yet its tall towers and modern silhouette may have helped alter central London’s skyline. The City’s planning policy has changed since Canary Wharf became a serious contender. Even Michael Snyder, at the City of London Corporation, admits that Canary Wharf’s success acted as a “wake-up call” for the corporation, which has recently allowed skyscrapers such as Swiss Re’s “Gherkin” to be built. The alternative loomed large: a City of London in decline.
This year may prove crucial for Canary Wharf, at least in corporate terms. The company first floated on the London Stock Exchange in 1999. Four years later, the share price collapsed and a bidding battle ensued between Reichmann and a consortium put together by Morgan Stanley, his previous advisers. The Canadian magnate lost.
Since the takeover, the estate has been owned through a fiendishly complex structure involving various classes of shares. The investors are thought likely to sell out sooner rather than later to take advantage of Britain’s hottest-ever commercial property market. Vacancy levels at the complex are now hovering just above zero and several new developments are planned.
Some say it would not be too whimsical to envisage the return of the estate into the sole hands of Paul Reichmann. Lord Heseltine, as he escorts me out of his offices, describes the developer as one of the most extraordinary men he’s ever met.
“In 1979 I never would have known who would come along, that it would be Paul Reichmann, and thank God that he did.”
Jim Pickard is the FT’s property correspondent