Rental levels expected to nosedive after more financial occupiers curtail space requirements
Robert Gibson
Canary Wharf will soon be hit with a landslide of surplus space and will struggle to maintain rental levels.
It has emerged that Morgan Stanley is to sublet up to 300,000 sq ft in its 500,000 sq ft (46,450m2) 20 Heron Quays Road building.
The McGraw Hill Group has also appointed consultants to determine whether it should occupy all of its allotted 310,000 sq ft in the 500,000 sq ft (45,450m2) 20 Canada Square.
The financial information provider is also “very unlikely to exercise” an option for the further 190,000 sq ft on the building, which expires in June.
Martin Wallace, head of Jones Lang LaSalle’s City agency, said: “Our research reveals that by the end of next year there could be more than 2.4m sq ft of space available at Canary Wharf.”
JLL’s figures include up to 750,000 sq ft of disposals by Citigroup and Credit Suisse First Boston, as well as additional available space.
A source close to Canary Wharf conceded that rents were likely to dip in the second half of the year. He said: “There are market rent level sublet clauses in tenants’ agreements but they are much less draconian than leases you would have seen 15 years ago. Otherwise you get penalised in rent reviews for having onerous contracts.”
Andrew Causer, property analyst at JP Morgan, said: “We retain a cautious stance on Canary. Many banks are still job cutting. In New York, Morgan Stanley and Goldman Sachs are going to relocate substantial parts of their equities business from Wall Street as part of a dispersal program. That may have implications for Canary Wharf.”
Chris Vydra of Canary’s joint letting agent Insignia Richard Ellis, said: “Figures being bandied about are Armageddon scenarios. Our current vacancy rate is 4.4%, which compares very favourably with the City vacancy rate of 6.5%.”
Meanwhile, Citigroup has replaced CB Hillier Parker with Healey & Baker to dispose of unwanted space in its 42-storey tower. City agents are convinced that more than the official 300,000 sq ft is available.
Finance, p49
