BUILD it and they will come. That was the mantra which underpinned speculative developments during the boom years. These days it’s more like “show me the tenants and I’ll show you the money”. Without a confirmed pre-let, it’s awfully difficult for smaller developers to get funding, hence why work on the so-called Helter Skelter has stopped (see story opposite).
There was better news from Canary Wharf Group, which convinced Bank of New York Mellon to stay on in its offices on the top six floors of 1 Canada Square (story also opposite). The Wall Street bank will pay £42.50 per square foot from 2014, a higher rate of rent than it paid previously, we understand. This suggests Canary Wharf Group is still pushing up rents, especially for its most premium office space.
So what do these two stories tell us about the state of London’s commercial property market? First, that small-time developers such as Arab Investments, the group behind the Pinnacle, will struggle for the foreseeable future. They are no match for listed giants like British Land and Land Securities, who can use existing revenue streams to fund their development programmes.
Second, that big financial institutions still need offices with very large floor plates such as One Canada Square. Only Canary Wharf and a handful of City buildings can provide this kind of space, meaning they will benefit enormously from squeezed supply when leases are renewed over the next few years.
That bodes well for the Cheesegrater and Walkie-Talkie, but makes it harder for the likes of the Walbrook and Cannon Place.