The Walkie-Talkie skyscraper in London's financial district should be two-thirds let by the time it opens next year as companies revive moving plans shelved during the financial crisis, developer Land Securities (>> Land Securities Group plc) said.
The tower, located in the City of London's insurance neighbourhood, is being co-developed with Canary Wharf Group (>> Songbird Estates plc) and currently has pre-letting deals for 52 percent of its floor area, Britain's largest listed developer said in a trading update on Wednesday.
Land Securities is betting that a wave of companies will have to move in the next few years due to lease expires. A supply squeeze due to low levels of construction during the financial crisis will limit their choices.
The group has been selling older properties to fund development of new London office blocks without letting deals in place. It has announced the start of more than one billion pounds of London schemes this year with no lettings in place.
"This was never predicated on a bull market but the fact there is not enough of the right stuff being built," Chief Executive Rob Noel told Reuters.
The projects include the 897,000 square feet Nova Victoria scheme of offices, shops and apartments being developed with Canada Pension Plan Investment Board.
Land Securities sold 152.6 million pounds ($231 million) of property in the three months to the end of June and signed 5.5 million pounds of development lettings, it said in a statement.
The company, which also owns the landmark Piccadilly lights site in London, said a more efficient use of space in its newer buildings meant companies needed less floor space per worker. This resulted in higher rents per square foot, but not higher overall costs.
Less corridor space and so-called break-out areas rather than meeting room space in the Walkie-Talkie is one way costs are kept down. It means companies need eight square metres per worker rather than ten, Noel said.
"Once that light bulb goes on we're in business."
($1 = 0.6613 British pounds)
(Reporting by Tom Bill. Editing by Jane Merriman)
By Tom Bill