Canary Wharf, the 85acre estate in what was once the desolate east London docklands, will be fully spoken for within the next 18 months, its executive chairman has predicted.
Paul Reichmann, who led the redevelopment project from germination and construction through to receivership and finally to rejuvenation, has said that the pace of demand from occupiers had been even greater than initially predicted.
He was unveiling the final development phase of its estate, consisting of a further 3.5 million sq ft of space. This includes a one million sq ft tower, of which 700,000 sq ft has just been let to the international law firm, Clifford Chance.
The firm, which is expected to occupy the new tower by the third quarter of 2003, has an option to lease the remaining 300,000 sq ft. Underlying the unexpectedly rapid expansion of Canary Wharf is the pace of change at multinational corporations. Mr Reichmann said they were expanding far faster than before. The demands of corporate occupiers are straining central business districts in financial capitals around the world. In New York, rents are estimated to have risen by 30 per cent this year alone.
Demand is best illustrated by the steep rise in average annual London Docklands rents to £269.10 sterling ($406) per sq m, up from £172.22 two years ago and from £80.73 per sq m in 1995, according to data from property consultants Knight Frank.
Moreover, these occupiers want modern buildings designed to accommodate the cabling and other equipment necessary to give employees access to highspeed voice, data and multimedia services. John Bernard, head of human resources at Clifford Chance, the international law firm which last week announced it would move from the City of London to Canary Wharf, said that the decision largely reflected the firm's desire for flexible accommodation. "We could have had a village of buildings or split the firm into two parts, but culturally, that doesn't work," he said. "We can expand or contract at Canary Wharf and we have the opportunity to go up or down," he added.
Mr Bernard said that Clifford Chance was also seeking new headquarters in New York, where similar considerations applied.
"In New York they are taking down 30 and 40-storey office towers and replacing them with 60-storey towers," he said.
Flexibility on planning has been a boon to developers and occupiers there. This is because Canary Wharf is one of the few London sites where planners allow tall buildings, allowing occupants to centralise their operations.
Organisations that have expanded piecemeal in London face various transport problems between sites. Some run a fleet of people carriers, but this wastes time and money.
A quick review of Canary Wharf's tenant base shows why elasticity in accommodation has become such an issue. Some of the largest investment bank occupiers, including Citigroup and Credit Suisse First Boston, acquired or merged with other firms while the building was under construction.
When Canary Wharf floated in March 1999, 64 per cent of the estate was occupied or under construction. The company then predicted it would take five to seven years to complete. Mr Reichmann said the estate should be fully spoken for within the next 18 months.
