Craig McWilliam’s sudden departure from Grosvenor Britain & Ireland in January 2020, almost a year before he was set to take on an even bigger role at the Duke of Westminster’s property company, took many by surprise. McWilliam was, at least from the outside looking in, the perfect Grosvenor boss. Polite, charming, smart, well-spoken, caring. He had done his time there, joining in 2010 and taking over the Britain & Ireland chief executive role in 2017, but the two were not meant to be.
He reappeared at the end of the year at the NHS in a new role helping to see through the £3.7bn government initiative to build 40 new hospitals by 2030 but, despite being offered a permanent job with the health service, McWilliam was keen to find a different challenge. A more solvable challenge perhaps – turning thousands of unloved arches in some of the country’s biggest cities into viable, sustainable business spaces. And doing so without completely alienating the traditional, long-term tenants that have called the arches their home for decades.
In January this year, McWilliam was appointed chief executive of the Arch Company, a firm formed following the £1.5bn acquisition of a portfolio of 5,200 arches from Network Rail by a joint venture between Blackstone Property Partners and Telereal Trillium in 2018.
Running a portfolio of more than 5,000 spaces, a third of which were empty on purchase, with a very vocal tenants’ group (Guardians of the Arches) concerned that some new corporate owners would ramp up prices and force them out, is definitely a challenge. Maybe building hospitals for the government would have been easier, after all.
But McWilliam is clearly loving the role, not just his own of chief executive, but the role he believes railway arches have in building communities throughout the country’s cities.
“Since they were built in the 1850s, the railway arches have provided a back office for bits of London and other cities, and over the years that has changed a lot,” says McWilliam, sporting a hard hat and high-visibility jacket as we wander around one of the vacant arches.
“When we look back historically, they were full of farriers and blacksmiths and cold storage depots, but in the past 30 to 40 years, as London became a much more intensely used place, the opportunity for the railway arches became much more apparent. Network Rail understood what the arches could do and, in some places, they had the money and they invested and did some great projects, but they could never take full advantage of the opportunity.”
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The Arch Company, with the deep pockets of Blackstone and Telereal Trillium, however, can. McWilliam says the Arch Company finds itself in the enviable position of being a start-up company – it didn’t exist until 2018 and has no legacy IT, policy or processes – but with an 18m sq ft portfolio, more than 3,500 tenants and some seriously capitalised parents.
“As a chief executive that’s fantastic,” he says. “We’re starting with a blank sheet of paper. We don’t have the normal infrastructure that an established company would have so we’re having to create things, whether that’s technology systems, policies, processes… That’s quite good fun. Although daunting.”
What gets written or drawn on that blank sheet of paper depends on how McWilliam runs the company. Type “Arch Company” into a search engine and it doesn’t take too many results to come up before there’s a story about an MOT garage or other traditional business that feels it is being forced out through the gentrification of the arches.
McWilliam says the company has been understanding of its tenants and is working hard to balance legacy with the needs of the arches and the communities around them. Following the acquisition of the portfolio, the Arch Company established a tenants’ charter setting out 44 specific commitments around service levels its customers can expect from it, including a policy that provides discounts for long-standing small businesses that would otherwise struggle to pay market rent.
When coronavirus forced many businesses to shut, McWilliam says the Arch Company did as much as it could for tenants by providing rent-free periods, establishing payment plans and moving people to new locations.
“Covid was a very difficult time, but it allowed us to build a relationship with our customers, which hopefully let us get to know them and let them get to know us and to signal how we want to work with people,” he says. “We are a business, but we also understand that we’re only successful if our customers are successful. We don’t get paid if shops are shut, we only get paid if people are profitable. So, we’re trying to build a company which makes sure that our customers are as profitable as possible. That is the route to demand for our assets, which is the route to us being successful.
“If we focus on the customers, the spaces, the amenities that we provide, the mix of tenants, the communities that they form, then that’s the way to be successful as a business.”
But what about those stories detailing colossal rent rises? McWilliam says most rent increases have been “quite modest”, with the average arch rent being around £30,000 a year. He admits that “some” have seen significant increases, but says this is usually because they have a rent dating back 10 or 15 years on which there has never been a review.
“Where there are long-established businesses which are otherwise perfectly viable, then we will work with them to try and make sure that their rents rise incrementally or there are payment plans. Sometimes we’ll help move them to other locations,” says McWilliam. “But there is a tension between the old and the new, and I don’t think it is our job to protect the old at the expense of the new. Our job is to manage the transition. To be respectful and support businesses, but also to try and allow the change to happen. Nobody wants arches full of knacker’s yards or glue factories any more… instead we see microbreweries, electric vehicle charging businesses and food distribution companies wanting that space.”
Project 1,000
Part of trying to allow that change to happen is the Arch Company’s Project 1,000 – a scheme launched in 2021 with the aim of investing £200m to bring 1,000 empty and derelict arches back into use by 2030. It is anticipated that the project will create 5,000 new jobs within the arch portfolio.
The flagship project is Findlater’s Corner, a set of arches that any commuter crossing over London Bridge on their way home via London Bridge station or for a decent bite to eat in Borough Market will know well.
Many will remember the site as a large Oddbins store, perfectly placed for that quick shop to pick up a bottle to have with dinner after a stressful day in the office. The site has been vacant since 2018, but the Arch Company is close to bringing it back to its former glory. The site will be let to more mainstream tenants than arches have traditionally been occupied by owing to its location and size. Expect a stream of F&B businesses to open their doors there next spring.
“I think if you own a lot of property, there is an obligation to make sure it is productive,” says McWilliam. “That’s the trade you make as an owner with society as a whole – to try and ensure that your places inside cities are functioning, giving people jobs, creating prosperity and playing their part in the community. Project 1,000 speaks to that exactly. It is about investing in those redundant spaces and bringing them back into use.”
For McWilliam the project is a fantastic way for the business to deploy capital and really open the arches up. In cities like London, where so much redundant space is being turned over to residential, McWilliam sees huge opportunity for the arches to deliver employment space.
Creating community and committing to that trade with society is key for McWilliam. Especially around the current ESG lens through which business is increasingly taking place.
From an environmental point of view, McWilliam will admit the business isn’t that far along on the journey, as arches with no heating or air conditioning have a relatively small carbon footprint. The business is doing its bit around embodied carbon, however, by bringing buildings back into use, rather than knocking down and building afresh.
But when it comes to the S of ESG, McWilliam is convinced the arches have a powerful role to play through creating local employment opportunities and allowing local entrepreneurs to start and build their own businesses.
“You don’t know what goes on in an office,” he says. “To most people the big offices in London and other cities don’t look like places for them. They stare through the doors and it’s all very formal. There’s a security guard and everyone is in suits. But you walk past an arch, and it is probably run by someone like you and they’re probably doing something that perhaps you do, or have done, or would like to do.
“You’re often in and out of these spaces so much that there is a greater sense of attachment to them,” he adds. “That’s actually one of the challenges for us.”
New company, new approach
The Arch Company says it is the biggest landlord to small and medium-sized enterprises in the country, but McWilliam is keen it becomes known as the best as well – something he is hopeful Project 1,000 will enable.
“Over the next two-and-a-half years we will have spent more than £100m and we’ll have done hundreds of projects,” says McWilliam. “Thousands of people will have worked with us as customers, as contractors and as partners. And hopefully, that experience, those touch points, will mean that people begin to understand that this is a new company with a new approach to these spaces.”
He adds: “Investing in better estate management, investing in security so people are safe, their staff are safe, their customers are safe, managing the place so it looks better for them and their customers, those are the things we should be doing because that is the job of a landlord – making it look like somebody cares about you.”
And McWilliam clearly does care. There’s a boyish excitement to his voice when he talks about the portfolio and its vastness in size and opportunity. There is potential for exciting new projects in Digbeth – the Hoxton of Birmingham – where the Arch Company has a run of “massive railway arches”; in Manchester, where its Zig Zag site, an old cattle loading and unloading station for the railway, has the opportunity to house a new F&B scheme fronting directly onto the new music venue being developed next to the science museum; and in south-east London, where the firm has recently submitted plans to bring 29 empty and derelict arches at the Bermondsey dive-under railway junction back into use. If the Arch Company gets the nod, those arches will provide some 65,000 sq ft of new light industrial workspace.
“There’s no shortage of opportunities,” says McWilliam. “And not only have we got the units that were vacant, but obviously units come back to us where different things can be done. By investing in them, making them dry and secure, putting in the right utilities, different groups of customers want them.
“And if our job is about managing transition and supporting customers, then investing to allow that to happen is both good for business and good for the economy of the cities we’re in.”
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