Elsewhere: Glass and Steel Reflect Winds of Change

Attempts to build gargantuan glass and steel skyscrapers within the financial heart of the capital were usually doomed to failure.

This partly reflected the drab pinnacles stuck up a generation ago, such as Tower 42, formerly the NatWest tower, and Centre Point at Tottenham Court Road.

There was also an attitude of complacency. The City had been the comfortable habitat of bankers, insurance brokers and corporate lawyers for so many centuries that there seemed little reason for change.

By contrast, the newly named Corporation of London has become a champion of new architecture.

Some observers have linked this change of heart to the effusive Peter Wynne Rees, head of planning at the Corporation, who has been pushing for skyscrapers to be built by the likes of Minerva, Heron, DIFA and British Land against opposition from English Heritage and others.

After hearing English Heritage’s criticism of DIFA’s proposed “Helter-Skelter” tower, Mr Rees claimed the body had “outlived its usefulness”. A few weeks ago, he flippantly compared Simon Thurley, English Heritage’s youthful chief executive, to Draco Malfoy – the unpleasant child in J.K.?Rowling’s Harry Potter books.

But it would be wrong to attribute the Corporation’s outlook to one man’s views. In fact, the story behind the changing face of the City begins in the 1980s when the Thatcher government sought to bring investment and jobs into more neglected corners of Britain – including London’s Docklands. The government pledged new transport infrastructure and generous tax concessions towards the dismal area several miles to the east of the Square Mile.

The ensuing battle by Olympia?&?York, the Canadian developers, to create a mini-metropolis amid the tumbleweed of Canary Wharf was one of hubris and short-term failure.

By 1995, Canary Wharf was in the hands of creditors and appeared to be the ultimate white elephant.

For the developers, it had been a rocky ride. Yet slowly but surely, the estate has proved its allure to a host of occupiers, including the big US investment banks, who like the low rents and large floorspaces.

Now confidence is high, with new tenancies signed in the past month including Aon, the reinsurers, and State Street, the US bank.

KPMG, the accountancy firm, is in talks to open new offices on the estate where 4,000 people will work, leaving only 2,000 in the City. “We wanted good quality offices and decided Canary Wharf offered the best availability,” says Gavin Houlgate, the group’s spokesman.

Canary Wharf is so sure of its future, it is planning an adjacent 5m sq ft development called Wood Wharf.

The project, a joint venture with Ballymore, is a sign that the pendulum of London’s business district has swung east.

Although there are many high-quality – or “grade A” – schemes in the area, however, there is also a legacy of cramped and dated office stock awaiting replacement and nominal rents in the City are still below their 1989 peak of ?65 per sq ft.

When it was suggested last weekend that Minerva, the property group, might have won planning permission for its new tower after its founders lent millions of pounds to the Labour party, the Corporation’s irritation was evident.

“The City of London Corporation has a clear policy of encouraging the right new office space to cope with demand from the international financial business community based in the ‘Square Mile’,” it said. “The City Corporation was careful to consider all relevant issues thoroughly before granting permission.”

For now, most of the new skyscrapers – including Minerva Tower – remain on the drawing board, awaiting large pre-lets from occupiers. Only Heron is likely to go ahead speculatively.

Aside from the towers, the quality of the City’s office stock is set for a big upgrade by the end of the decade as many large schemes planned by the likes of British Land, Land Securities and Hammerson are realised.

A glut of projects could prevent top-end rents from rising from their current level of about ?50 per sq ft to the ?70 predicted by optimistic agents.

But if Canary Wharf was not enough to worry about, the Square Mile also faces competition from other quarters as the outline of London’s business district blurs in all directions.

To the south of the Thames, and within walking distance of both the West End and the City, Southwark is fast emerging as a viable location for companies. A down-at-heel area only a decade ago, it has been transformed by a plethora of trendy restaurants, and attractions such as the Tate Modern gallery and Shakespeare’s Globe theatre.

As a result, new office blocks have sprung up, such as More London near London Bridge, the Land Securities’ Bankside project behind the Tate, and Mallory Clifford’s Palestra scheme off Blackfriars Road.

Irvine Sellar, an ageing property entrepreneur, has plans for Shard of Glass, the tallest building in western Europe at London Bridge.

To the west of the City, the so-called “mid-town” area is being redefined as a popular business location. Land Securities has secured a letting with Deloitte for its proposed 700,000 sq ft scheme at New Fetter Lane.

But it is to the north that perhaps the greatest threat is set to emerge. Argent, the private company behind the redevelopment of King’s Cross, won planning permission last month to develop a 67-acre site near the train station. During the next decade, Argent will create 4.5m sq ft of new office space, equivalent to nearly five One Canada Squares.

“King’s Cross, with the new Channel tunnel rail link, is set to be one of the biggest public transport hubs in London, which will make it attractive to occupiers,” says Mark Charlton, head of research at Colliers CRE, the property agents.

At nearby Euston station, on a separate 15-acre site, some of the biggest names in British property – including Chelsfield Partners, Stanhope and British Land – are vying to build a giant 4.3m sq ft scheme that will house new offices.

Add in other projects, from Stratford City in the north-east, Battersea Power Station and several schemes at Paddington in west London, and the redevelopment of Waterloo and Elephant & Castle to the south, and there are a multitude of locations from which business occupiers will be able to choose.

Mr Charlton says recent research suggests London could need up to 100m sq ft of new office space by 2016. If so, the new projects will be gratefully lapped up by the city’s businesses.

If the projections prove over-optimistic, however, London could be left with acres of unwanted space, given that vacancy levels are only now starting to recover from the occupier recession of three years ago.