London plans more offices

eFC logo

The Lombard Street Research group estimates that the City of London will need to provide at least an extra 10 million square feet by 2010, about 12.5% above the current total.

Lack of floor space may not seem the most urgent priority in an economic slowdown, but the long-term trend shows that action is needed.

The Corporation of London - the City's local authority and largest landowner - says it is committed to finding the extra space and has earmarked a number of sites.

One is Spitalfields market in the borough of Tower Hamlets. Bars and restaurants frequented by bankers are to be knocked down - many have already closed - and they might instead find themselves working in offices to be built there on a 10-acre site. Some local residents are trying to halt the scheme, arguing that the market is an important part of community life.

The Corporation is also planning to develop a derelict railway goods yard, which comes under the jurisdiction of both Tower Hamlets and Hackney boroughs and is owned by Railtrack.

This plot, between Spitalfields Market and Bishopsgate Goods Yard, is big enough for at least one million square feet of office space for up to 5,000 staff.

Judith Mayhew, chairman of policy at the Corporation, says: 'We are working with both boroughs and Railtrack to see what can be placed on the site, which will be sympathetic to the needs of both the local community and the City of London.'

The Corporation also wants to build on the western side of Smithfield market, which may mean the end of the historic meat market. It is also looking to develop one million square feet at St Alphage, close to the Barbican.

The Corporation nowadays seems increasingly in favour of building high in a bid to attract financial institutions, many of which have relocated to Canary Wharf.

Mayhew says: 'We are expanding to serve the demands from both British and global financial services. We are running out of space, so we will need tall buildings. Some of the big financial players want more space because of increased conglomeration.

'Demand for space comes from a variety of companies, including lawyers, banks, accountants and fund managers.'

Other areas of London where commercial development is imminent include Paddington and Waterloo, though there is little sign that banks will want to move there, so far to the west of their traditional base.

Meanwhile, Canary Wharf to the east continues to attract tenants from the City, partly because of its cheaper rents. But it is also running out of space.

Mike Hussey, head of leasing and marketing at the Canary Wharf group, says: 'The property market needs significant amounts of large building space and at the moment, there is no place to go.'

In the 1990s, Canary Wharf was seen as the safety valve for companies seeking modern, efficiently designed floor space as the City became congested.

Lehman Brothers has leased one million square feet, the entire space in the building currently known as HQ2, which is under construction on the Heron Quays district of Canary Wharf. The building will be completed in late 2003.

Stuart Prosser, executive director of marketing at Lehman Brothers, says: 'It will house around 5,000 people. The obvious advantage is that it is big enough to serve all our needs in one go.'

Canary Wharf Group has more than six million square feet of space under construction in 10 buildings at Canary Wharf. Most has already been booked by HSBC, Citigroup, Credit Suisse First Boston, Morgan Stanley, Clifford Chance, the Northern Trust Company and McGraw-Hill.

After that, Canary Wharf has only three million square feet of potential development land left.

Property developers and regeneration groups believe that areas east of Canary Wharf could be suitable for building offices.

Robert John, adviser to the Canary Wharf Group, says: 'The Mayor's London plan and the Government's objective is to focus on London's growth to the east. This is the future for London.'

Melbourne Barrett, chief executive of Docklands East London, a joint private and public sector inward investment agency, says the opportunities are huge.

'East London and Thamesgate areas will provide the space at the densities required for further growth. This will happen on the back of the necessary transport infrastructure improvements.'

A number of financial institutions have already started to invest in the area, recognising its potential, he says.

'Schroders Property Investment Management is investing in Canning Town to develop a business and contractor park to support the new Excel exhibition centre. Standard Life Investments has put in significant investment along the A13 in a number of industrial development schemes.'

Three river crossings are being considered by the Government and the Mayor of London, Ken Livingstone, to make the area more attractive to employees and residents alike. A bridge and two tunnels would be built at Blackwall, Woolwich and Thamesgate. A new CrossRail service, linking East and West London, is also in the pipeline.

Many people feel that the existing transport serving Canary Wharf is inadequate and that the influx of tenants due there will make things worse.

One senior investment banker at Credit Suisse First Boston, says: 'The Jubilee underground line is packed out at 7am and the Docklands Light Railway is slow and unreliable.

'It is becoming increasingly frustrating not only travelling to and from work, but also if you have a meeting in the City or the West End. It is not convenient to travel by taxi because of all the traffic congestion.'

Canary Wharf Group is currently in arbitration proceedings against the Jubilee Line, arguing its services are sub-standard.

But Canary Wharf still wows the financial community with its spacious offices and with constant improvements being made to the infrastructure. As it expands, an increasing number of investment bankers are moving into the area to live closer to work.

Taru Oksman-Ison, a director at the Principal Search recruitment firm, says: 'Over the last couple of years, we have seen a very discernible change here and it is no longer considered to be no man's land. Three to four years ago, we would never have been posting job offers to post codes such as &euro14 (Canary Wharf), but nowadays we increasingly do so.'

Office space at Canary Wharf remains competitive in price, compared to the City of London. Grade A buildings in the City generally cost around 62 a square foot, whereas Canary Wharf cost around 45.

The fringes of the City, the area to which the Corporation of London is increasingly turning, are more competitive, also costing around 45. Having lost some of its banking clients to Canary Wharf, is the Corporation of London turning the tables?

Hussey of Canary Wharf says: 'Bishopsgate Goods Yard is a potential competitor, but it is all about timing as this area will come up after Canary Wharf has been filled.

'There are a number of targeted areas around the City fringe that will be able to compete. But that is good, because we need more space.'

Popular job sectors


Search jobs

Search articles