April 2011 Archives

Recent research into the banking services in London has revealed that it can be expected that a further 1.6 m sq ft of office space in central London will be required over the next three years as confidence returns to economy.

The equivalent size of four Shards or five Heron Towers would be needed to accommodate an extra 11,500 employees by the end of 2013.

The financial services sector accounts for a large section of office space and 36% of total take-up in the city can be attributed to the finacial services indusrty, up from 22% in 2008.

A number of significant deals last year were down to financial firms including UBS's 700,000 sq ft prelet at 6 Broadgate and Macquarie's deal to take 212,000 sq ft at Ropemaker both in EC2.

However, the research suggests that there are obstacles facing the growth of banking services in London which may ultimately hinder London's reputation as one of the most important global financial centres. The much hyped higher taxes on bankers and the ever increasing government involvement and regulation may in due course cause more difficulties for the banking sector. 

The long, expensive saga of 25 Canada Square is nearing its end, following an announcement that the building is expected to be brought formally to market this week for more than £1 billion. The 1.2m sq ft tower's owners, Glenn Maud and Derek Quinlan, have instructed Jones Lang LaSalle to sell the asset.

This history of this building over the last few years is a classic story of the last boom and bust. It was bought in 2007 for £1bn from Royal Bank of Scotland, in a joint venture between Irish investor Derek Quinlan and PropInvest. At the time it was the second-largest transaction ever seen in the UK after the HSBC tower, which Metrovacesa bought for £1.1bn in April.

But then things started to go wrong. The joint venture was up to its eyeballs in cheap debt. But the recession exposed its assets as being wildly overvalued, and by as early as August 2008 it had breached the 80% loan-to-value covenant on its £920 million loan deal with Barclays Capital, leading to long discussions about re-financing with various lenders.

By summer 2010 the joint venture was given less than six months to arrange refinancing of more than £1 billion of debts secured again 25 Canada Square. Now that's a pretty hefty mortgage! But the building hadn't been revalued since November 2007, when it was given a value of £1.2 billion - before the crash in property prices.

Jones Lang LaSalle was then appointed to arrange marketing for the building in July 2010, as the owners and their creditors, Santander, Allied Irish and the Royal Bank of Scotland, were hoping to capitalise on the resurgence of property values after the recession. And there was plenty of interest from overseas investors.

So now it's almost available, but still with a price tag below its value way back in 2007. But will the banks learn the lesson next time round?

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British-Australian mining giant Rio Tinto originally founded in 1873 has taken space at Two Kingdom Street, Paddington Central where they will occupy the entire 6th floor.

The recently completed development part of the Paddington Central scheme was a joint venture between Development Securities, Aviva Investors and Avestus Capital Partners which totals 230,000 sq ft of office space. The other tenant at the scheme is pharmaceuticals group AstraZeneca.