With HSBC's Canary Wharf exit, commercial real estate meltdown expected to drag on
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The commercial real estate market has been facing multiple headwinds, ranging from the post-pandemic work-from-home model to rising defaults for commercial mortgage-backed securities. 
Even as the hybrid work model becomes more popular, large office spaces still remain vacant, pushing businesses to shift to smaller and less expensive properties.
HSBC (NYSE:HSBC) is planning to shift its global headquarters from London's Canary Wharf to much smaller offices in the City of London in 2026, as it cuts its worldwide office footprint by ~40%. HSBC, which set up shop in Canary Wharf in 2002, is looking to move into British telecom firm BT's former headquarters.
"HSBC (HSBC) is showing foresight by using the move to hybrid working to allow it to have a smaller, greener, more flexible headquarters," said Andrew Mawson, managing director at workplace consultancy AWA.
The move will likely deal a blow to the Canary Wharf hub, which is already saddled with mounting debt and may be forced to sell some assets at a discount to help it deleverage.
Office markets continued to see heightened uncertainty during Q2, according to real estate firm JLL, with global office leasing volumes down 14% Y/Y. The global vacancy rate rose 30 basis points to a record high of 15.6% in Q2.
"Leasing activity is likely to remain subdued as economic growth slows in major markets through H2 2023," it said. "Accelerating return-to-office mandates, upcoming lease expiries and lower renewal rates will provide additional impetus to demand for new, high-quality space."
More than 20% of office space has been vacant in the U.S., according to Morgan Stanley. "We expect commercial real estate to underperform on a relative basis in the near-to-intermediate term," said strategist Scott Wren.
Even so, U.S. companies are looking to lure workers back to offices., while Zoom (ZM) - one of the biggest beneficiaries of the remote work revolution - is shifting to a hybrid work model.
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