Outlook: High cost of Canary Wharf's success

WHAT WITH all the cranes, building work, the chattering of foreign tongues and the general air of conspicuous prosperity and consumption, it feels quite like the 1980s again down here at Canary Wharf. Certainly you wouldn't believe this was part of near recessionary Britain. The complex now even boasts its very own financial scandal - based around a group of high earning, high living CSFB traders allegedly calling themselves the Flaming Ferraris.

From where we sit, the level of activity is truly astonishing. Looking out from the Independent's City office in the South Eastern corner of the existing Canary Wharf tower, to our immediate left rises the near complete Citigroup office complex. Immediately to the East of that, work has already begun on the Salomon Smith Barney tower, which will eventually be linked to the Citigroup building via a connecting trading floor.

To its left, the foundations are being laid in the remains of a disused dock for Britain's largest ever non governmental office block - the HSBC tower. Looking out towards the City, the high rise cranes litter the horizon. There are luxury hotels, apartments, more offices and more complexes going up right left and centre. If ever there were a right time to tap the markets for extra money, this would seem to be it. Canary Wharf, in receivership less than seven years ago, is a success at last.

Unfortunately, this fairy tale comeback for Paul Reichmann and his fellow travellers, cannot be said to demand unquestioning admiration. The cost of success, to the taxpayer and other regions that might have benefited from such development, is a high one. To make it work, Canary Wharf has required the most expensive piece of road ever built - the Limehouse link.

On top of that comes the Jubilee line extension, a stretch of tunnelling of both unprecedented cost, and outside servicing the wharf, of highly dubious general worth. Without these two pieces of infrastructure, Canary Wharf would still be a millstone round its bankers necks. Massive tax breaks, from which construction of the HSBC tower will continue to benefit, has further subsidised the planned stock market flotation.

Still, it would be churlish to be unduly cynical. We are going to have to await publication of the prospectus to make any kind of investment judgement on this company, but on the face of it, the complex should be capable of attracting quite a following. Today's capital structure is completely different from the one that sunk the venture in the early 1990s. Most banking debt has been securitised against rents, and what remains will be covered by the proceeds of the share sale.

Future developments will be financed on a highly conservative basis, with the company promising to keep speculative development (where properties are built without tenants to occupy them) to a minimum. The chances of the company going bust again would therefore seem remote. Its longer term prospects are another matter. With rents for new tenants beginning to approach those of the City, the complex may need to demonstrate attractions other than just the promise of acres of cheap, modern office space to persuade financial institutions to keep moving east.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'