Is London Bridge Down?


What middle-aged Canadian does not remember the name of Paul Reichmann, who designed, built and eventually lost some of Toronto’s best designed office-buildings? What may have contributed to his Canadian disasters was that he got involved in doing even more dashing pioneer development to relieve the congestion in the City of London, allegedly because Margaret Thatcher had agreed to have rapid transport built from the City of London where the old brimming business center stood to the former wharves in East London become too small for modern ships. The story went that Maggie Thatcher didn’t keep her promise and as a result the transport to the new development in East London was slow in attracting business tenants.

But there seems to have been more at stake than that, because the bad luck has caught up to the Reichmann’s East London buildings, too, a couple of decades later.

At this point we will turn over our tale to Eric Reguly and his story in The Globe and Mail (21/03, “London Falling”): “The heart of Britain’s tallest buildings, One Canada Square, is no longer the international bolt hole of Bear Stearns with its 1,370 employees. The Wall St. firm collapsed last spring. A short stroll will take you to the defunct London offices of Lehman Bros., which had covered one million square feet before the firm went bankrupt in September. Citibank, propped up by endless US government bailout loans, is still a Canary Wharf tenant, but a vastly diminished one as it eliminates tens of thousand employees around the world.

“[According to the] running tally done by the financial website Here is the City the figure is shocking: between August, 2007, and February, 2009 133,000 jobs were lost in investment banking, private banking, and asset management. Topping the list of woe is the new owner of Merrill Lynch, with 29,260 jobs vaporized at the two companies. As the downturn in the global financial services industry becomes dire, the futures of other big Canary Wharf names – Barclays, Morgan Stanley, Credit Suisse, HSBC – at Europe’s premier office development remain uncertain.

“London parties like no other city in Europe during the boom years, which began in the mid-1990s and were driven by the massive influx of capital investment capital and jobs into investment banking, asset management, underwriting, private equity and derivatives markets.

“Throw in one of the hottest real estate markets on the planet and you had a recipe for extraordinary growth.

“Now, London is falling as quickly as it rose. And there is little doubt that things will get worse before they get better, for London is the victim of a rare double-bubble: real estate and financial services.

“The recession is still deepening, and some of its effects have yet to be felt. As the City contracts spin-off jobs are in jeopardy too. But businesses such as restaurants and fashion stores often try to tough it out for months, perhaps a year, before giving up.

“The news isn’t entirely grim. Indeed, the first signs of London’s potential resurrection are already visible.

“Nomura has commandeered the old Lehman space. Not far to the east, an entirely new metropolis – Stratford City – is under construction next to the 2012 London summer Olympics site. Driven by discounting and reduction in the value-added tax (akin to Canada’s GST), retail sales in London rose 6.5% in January, compared with 1.8% nationally, and the weaker pound is keeping the tourists armies on the march.

“The job loss figure of 133,000 tallied by Here is the City does not include spin-off jobs in everything from law firms and ad agencies to accountancies and print shops. You can assume that these industries have entered the house of pain too. That’s because business services, which account for 25% of the London economy are ‘very dependent’ on the 8% of the economy directly linked to the financial services, said Mayor Boris Johnson’s economic director, Anthony Browne. A recent report he co-authored noted that the London consumer services have yet to return to 1970s levels, while manufacturing employment is down 80% from 40 years ago.

“British Airways killed flights between Dublin, another bombed-out financial center and the City of London airport near Canary Wharf because the drop-off in demand.

“The German bombs of the Second World War and postwar deindustrialization turned East London into something of a wasteland, but one with huge development potential because of the vast amounts of land close to the heart one of the world’s great cities.

“‘We worry about how deep the recession will get;’ Mr. Browne said. ‘We’re on a journey to the unknown.’”