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Canary Wharf put £150m toward refurb in deal that kept Morgan Stanley

In return, the US bank is believed to have removed a break clause in 2028, effectively committing to staying its current 547,000 space until 2038.
In return, the US bank is believed to have removed a break clause in 2028, effectively committing to staying its current 547,000 space until 2038.

The landlord responsible for Canary Wharf agreed to contribute £150m to the refurbishment of Morgan Stanley’s European headquarters as part of the deal that kept the US bank in the docklands finance hub.

When Morgan Stanley’s decision to stay in Canary Wharf was announced earlier this month, it was trumpeted as an endorsement for the area, which had struggled with companies’ slow return to the office.

The area had lost high profile residents such as HSBC and the magic circle law firm Clifford Chance to the City in successive years. Morgan Stanley was said to be weighing up a similar move to the Square Mile ahead of a break clause in its contract, but in the end decided to stay put, in what was seen as a major boost to Canary Wharf Group (CWG).

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However, the small print of the deal has shown that the landlord made concessions to get the deal over the line, including paying the handsome sum of £150m to fund a refurb.

In return, the US bank is believed to have removed a break clause in 2028, effectively committing to staying its current 547,000 space until 2038.

However, it is understood that the office space in question was 15 years old and due for an update, which CWG would have funded even if Morgan Stanley had opted to leave.

In addition to the refurbishment, Morgan Stanley paid CWG £27.5m to allow it to walk away from its lease on a smaller office in the hub, which had been practically empty for a number of years.

The nature of the agreement between CWG and Morgan Stanley is evidence of the increased power that the high-profile departures of HSBC and Clifford Chance have given the hub’s remaining tenants.

As of June last year, the district had an occupancy rate of 15.5 per cent, the highest in London, and last week CWG revealed that the value of its portfolio had dropped by £900m last year.

Morgan Stanley and CWG declined to comment.