Land Securities will press on with construction of the Walkie Talkie skyscraper even though it has not yet secured a major letting deal, the company has confirmed.
The London-based property developer’s chief executive Francis Salway said the skyscraper would be built despite the eurozone crisis and without a major tenant. The 38-storey building at 20 Fenchurch Street will be constructed in a joint venture with Canary Wharf Group.
Land Securities’ announcement comes the day after Great Portland Estates chief executive Toby Courtauld said a pre-let deal for its 100 Bishopsgate development was unlikely to be secured in the next six to 12 months. The project will not go ahead without a major letting in place.
Salway said Land Securities was “speculatively developing the building” and when asked if the scheme could be paused if the economic situation worsened, he simply said: “We are building the project.”
“I think there is data in a market which shows that levels of take-up in 2011 are more muted than in 2010, but interestingly what we are seeing is large corporates who need to move are recognising that they have little choice. We think the appetite for the relatively small number of new buildings that are being delivered continues to be good,” said Salway.
He continued: “What we have seen since the summer of this year in actually an increase in the number of enquiries on our committed development schemes, so we have live enquiries for all of 20 Fenchurch Street, 123 Victoria Street and 62 Buckingham Gate.”
Land Securities had announced its intention to build the Walkie Talkie even if a major tenant could not be found, but the eurozone crisis has raised concerns financial services companies could be reluctant to move.
The property developer’s net asset value (NAV) increased by 17 per cent year-on-year to reach 863p in the first half. Alan Carter, an analyst at Evolution Securities, said Land Securities’ NAV growth would come from its development programme alone. Carter said: “We fear demand and rental growth will remain muted for the foreseeable future.”
Land Securities’ portfolio value increased by 11 per cent year-on-year to hit £10.8bn, with the value of shopping centres and central London offices rising. It recorded pre-tax profits of £379m for the six months to the end of September, down 17 per cent on the same period last year.