London Commercial Property News – Property Development in the City

An important point in the new wave of development which is starting to come through in the City is that it will mean a further improvement in the quality of the structures. The obvious point is that an increasing number of tall buildings are about to start construction to add to the two that are already under way, the Heron Tower on Bishopsgate and the Shard at London Bridge and soon the Walkie Talkie building. The joint venture of Land Securities and the Canary Wharf Group will be funded by sovereign wealth funds from Qatar and China together with Morgan Stanley, all shareholders in Songbird which is the parent company of Canary Wharf, the 150 metres high Walkie Talkie building of 64,101 sq.metres (690,000 sq.ft.) will start construction in early 2011 onn Fenchurch Street and has a development value of £500 million.

The particular point about the decision to proceed is that it comes at a time of caution when the norm has been to start only when there is a pre let. In this case there are two powerful developers and well heeled investors who are prepared to back the view that rents will continue to rise on the back of a shortage of Grade A offices.

Tony Joyce of GVA Grimley said: “The situation of a limited supply of prime offices is getting worse. We are now seeing record rents in this phase of the cycle of close to £645.60 a sq.metre (£60 a sq.ft.).” Incentives are easing with rent free periods shortening and, said Joyce, landlords are more bullish and resisting early lease breaks of three or five years. Irvine Sellars’ Shard of Glass has shown that a bold move to start construction can pay off and he has even capitalised on the upswing by buying out the lease of Transport for London to achieve a higher rent in the new circumstances.

The next tower to go ahead will be British Land’s so called Cheesegrater in Leadenhall Street which is also likely to be built with a foreign investor. It would appear that that there are enough sizeable requirements, such as the insurance giant Aon, to fill these large properties.

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