US investment bank JP Morgan is considering leaving their European headquarters in Canary Wharf in favour of other premises in the City of London area.
This will be a harsh blow for Canary Wharf’s hopes to be the main financial district of London. JP Morgan are currently reviewing plans for its headquarters and the consolidation of all staff and buildings into one development, which may be in City rather than Canary Wharf.
JP Morgan’s chief executive Jamie Dimon first called the future of the scheme into question during the proposal for tax crack-downs on excessive bank bonuses. This proposal threatened to make JP Morgan and other international banks reconsider the idea of having European headquarters in London.
The Riverside South site was bought by JP Morgan in November 2008 for £237 million. The deal was seen as a major boost for Canary Wharf after the crisis caused by the collapse of Lehman Brothers. The purchase did contain an option in the contract where the developer can pull out by 2010, then JP Morgan would have to pay for both work done and also a £76 million contractual forfeit.
This means that renting will be cheaper for JP Morgan than owning their own buildings in London. They have declined to comment about the matter, whuilst Canary Wharf say there has been no change to contracts signed by the investment bank.
The downside is that many agents believe there are no premises or developments in London big enough for the bank. They will need a reported 1.7 million sq ft of office space, and although some sites may be able to be adapted for their use, it will be tricky.
Canary Wharf really suffered as a development during the banking crisis. Recently Nomura, a Japanese bank chose not to renew at the site, and chose instead a lease at Watermark Place in City.
Knight Frank reports that financial institutions are leasing office space at an astronomical rate, not seen since long before the recession. Availability is dwindling and demand is high.
The number of lettings in Canary Wharf rose by a lower amount in comparison to the City and Square mile during the last half of 2009.
This recent development in the capital proves just how fierce the market is becoming for office space in London, with different areas and developments really fighting it out to keep tenants or to attract news ones. This will means great deals for potential tenants, who will benefit from attractive incentives and competitive pricing.