The property developer Canary Wharf made its first foray into property ownership away from its eponymous Docklands base with a deal to buy Reuters' historic Fleet Street headquarters.
The transaction will see Reuters become the last significant media name to leave Fleet Street, when it moves into 281,000 sq ft at 30 The South Colonnade, Canary Wharf, in May 2005.
In return, Canary Wharf will acquire 85 Fleet Street and an adjoining building for a price of £32.3m, although Reuters will remain in the properties until 2005. By also agreeing to take over three other leasehold properties of Reuters, Canary Wharf said it was granting them the equivalent of two-and-a-half years rent free at South Colonnade.
Reuters said the deal would reduce property costs by approximately £5m per year and hoped it would bring the same benefits of efficiency that a similar move to one key site for its New York operations in 2001 had delivered. A spokesperson for Canary Wharf said it was too early to speculate on the future of the Fleet Street offices. One analyst thought Canary Wharf would be likely to continue to rent out the Fleet Street space even after Reuters' exit and await an upturn in the commercial property market before selling the property.
This is the first time Canary Wharf has owned freehold properties away from its Docklands base, although the company did assume the lease obligations of Clifford Chance when the law firm agreed to move to Canary Wharf from the City in 2000.
Nan Rogers, an analyst at Bridgewell Group, said the complicated and unquantifiable nature of the deal made it difficult to assess. The fact that other developers had not sought this type of arrangement indicated that Canary Wharf was more anxious than other companies to fill space, she added. This deal follows the more straightforward letting of 128,000 sq ft to BP earlier this month, which, together with the Reuters deal, are Canary Wharf's first lettings for two years. It is now estimated that approximately 1 million sq ft, out of a total 14 million sq ft, remains vacant at the company's vast estate.
The deal is a significant boost to Canary Wharf, which is at the receiving end of bid interest and further demonstrates its ability to rival the Square Mile in attracting major tenants. Rents between the two areas continue to converge, with the BP deal thought to be done at about£38 per sq ft, with typical City rents about the £50 per sq ft mark.