Clouds gather over Canary Wharf

[loki]

By Daniel Thomas and Chris Hughes in London
Published: November 14 2008 21:00 | Last updated: November 14 2008 21:00

Canary Wharf is facing the threat of rapidly emptying office blocks as big corporate tenants review their property needs after the wave of bank mergers triggered by the financial crisis.

Nearly 2m sq ft of office space in the Docklands financial centre – or more than 10 per cent of the district – is in danger of being deserted as demand for new space falls across London.

“It could become pretty lonely in some buildings,” one leading property agent said. “It is inevitable that we will see more empty buildings as Canary Wharf is the area that is most exposed to the financial sector.”

The biggest question mark hangs over the fate of the former Lehman Brothers headquarters. The recently refurbished European headquarters of Nomura, which acquired parts of Lehman after the bank collapsed in September, are near St Paul’s Cathedral in the City, London’s traditional financial centre. Lehman’s Canary Wharf offices are three times as big as those of Nomura.

Sadeq Sayeed, executive vice-chairman of Nomura International, gave a strong hint that Lehman would make the move when he quipped at his first staff meeting after the acquisition that it had taken him much longer to get to work at Canary Wharf that morning than his usual commute to St Paul’s.

Bank of America, which is based in Canary Wharf, is also considering a move to the City headquarters of Merrill Lynch, which it took over in September.

In addition to these moves, there is a risk of so-called “grey space” at Canary Wharf, as occupiers sub-let unneeded space.

While not an immediate problem for Canary Wharf’s owners, this skews vacancy levels – currently less than 4 per cent – and drags down property values. Citigroup, one of Canary Wharf’s tenants, is looking to sub-let more than 100,000 sq ft of space.

Deals are still being struck at Canary Wharf, however, and talks continue to rehouse JPMorgan in a new skyscraper on the estate. Canary Wharf declined to comment.

http://www.ft.com/cms/s/0/71dbbe5c-b...nclick_check=1