A tale of two cities

Kasmira Jefford
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BRITISH Land and Oxford Properties have bagged their second tenant at the Cheesegrater skyscraper in the City, underlining the booming demand in London’s insurance district in stark contrast to parts of the City that have traditionally depended on the banking sector.

Amlin is to take 111,000 square feet at the Leadenhall Building for an undisclosed rent, which means the 224-metre tower will be at least 51 per cent full when it opens in 2014, the firms said yesterday.

The deal comes after Aon announced last year it is to take up a third of the building.

The lacklustre City lettings market has been buoyed so far this year by a wave of insurers looking for new offices in the EC3 postcode, which is popular with the sector because of its proximity to the Lloyds of London building.

Last month Land Securities and Canary Wharf Group let 30,000 sq ft in the nearby Walkie-Talkie skyscraper to Lloyd’s syndicate Ascot Underwriting. It has also signed pre-let deals with insurers Markel, Kiln and RSA.

Minerva – owned by Delancey and AREA Property Partners – also announced last month that insurer Jardine Lloyd Thompson is to move its headquarters to the St Botolph Building in the City, sealing London’s largest letting deal this year.

The activity in the insurance sector compares with a near-frozen market for lettings in the bank and financial services sector, as companies shelve plans to move office due to job cuts in the sector and continuing economic uncertainty.

Recent office developments such as Hines’ Cannon Place and Minerva’s Walbrook Building, which sit in the EC4 and EC2 postcodes traditionally dominated by the financial service sector firms, have stood empty for more than a year.

“They are both excellent office buildings but perhaps the perception is that they are sitting in a market which is dominated by the financial sector and there is less demand in that area,” Matthew Elliott, partner and head of City agency at Drivers Jonas Deloitte, told City A.M.

“Their natural tenant base has been sitting on their hands. As and when that part of the market decides to let space – those buildings will let well.”

Recent figures by Drivers Jonas Deloitte show that a total of 4.1m sq ft of space is under construction in the City, a 15 per cent increase on six months ago and the first time that construction in the City has risen above the four million sq ft mark since the first quarter of 2009.

But despite signs of a pick-up in construction, developers delaying schemes in 2009 and 2010 means that overall building completions in the City remained low.

Developers such as Brookfield, which owns 100 Bishopsgate in a joint venture with Great Portland Estates, have delayed getting shovels out until signing a pre-let deal with a prospective deal.

Property specialists CBRE said the timing of when companies are looking to move also has a part to play in the contrast in lettings activity in the two parts of the Square Mile.

“Most of the transactions we have seen have been for the available space in EC3, which completes in 2014, whereas there is little available in EC2 that is under construction for the future,” CBRE said.

The firm offers some hope for the sector in the future: “Looking further ahead, we expect that the upcoming peak in lease breaks and expiries will fuel activity, particularly in the business services and banking & finance sectors in spite of some mixed economic news.”