LONDON (Reuters) - London’s Canary Wharf district is turning to smaller office blocks, apartments and street-level shops for its next phase of development as the financial crisis brings the era of the bank-branded skyscraper to an end.
The plan relates to a 20-acre site called Wood Wharf which is adjacent to the main estate and aims to tap into demand from “creative industries” like fashion, technology and the media, said Songbird Estates, the majority owner of Canary Wharf Group, alongside its full-year results on Friday.
“We have the space to cater for these different types of companies,” said Canary Wharf Group company secretary John Garwood. “In Shoreditch there is not a lot of spare space,” he said, referring to the scruffy east London area on the fringe of the traditional City financial district popular among fashion and media tenants.
As part of a plan to become less reliant on the ailing banking sector, this month Canary Wharf opened an area for new technology companies on level 39 of One Canada Square, the area’s tallest office block.
Demand from banks for new offices has dried up in the wake of the financial crisis and rents are dropping in some buildings in the City district where floors are still empty.
While developers say the technology and media industries will buoy demand, some have questioned whether it will be enough to plug the gap.
“The residential element of Wood Wharf makes perfect sense given strong demand and rising prices in central London,” said Investec analyst John Cahill.
“But you’d have thought technology and media companies would prefer the West End. I can’t see it being a driver for Songbird in the way it will be for Great Portland, Derwent London and Workspace,” he said, referring to the area of the city popular among tourists and shoppers.
More details on how Wood Wharf will evolve over the next 10 to 12 years, including the number of apartments and office space, is due this year, Garwood said.
Songbird shares were trading up 4.6 percent at 143.25 pence at 0920 GMT on the back of a better than-forecast 10.5 percent rise in net asset value to 210 pence per share at the end of 2012, said Cahill.
“The shares jump around a lot because there are so few in circulation,” said Cahill, referring to the fact the Qatar Investment Authority owns just under 30 percent of the company and China Investment Corporation controls about 15 percent.
Canary Wharf began luring major banks after it was created in the early 1990s, with the promise of cheaper rents, larger trading floors and better-appointed offices.
It now houses most of London’s large banks like Barclays, Morgan Stanley JP Morgan, most of which are locked into long leases where rents rise each year, helping to underpin the value of its real estate.
The company has also spread its wings in London by partnering on developments like the Walkie Talkie skyscraper in the City financial district with Land Securities.
It is also redeveloping the Shell Centre on the south bank of the River Thames with the real estate arm of Qatar’s sovereign wealth fund.
In September it said it was considering construction of the first block of apartments on the main estate, taking advantage of rapidly rising home prices in central London, fuelled principally by demand from overseas investors who see the city as a safe place to park their money in the financial crisis.
Editing by Mark Potter