Canary Wharf dives on office pressure

Shares in London property developer Canary Wharf lost a quarter of their value today amid fears over falling office occupancy levels.

The company – best known for its Canary Wharf tower in East London – said vacancy rates at the end of 2002 had risen to 6.7% from 4.5% six months earlier. Shares in the Footsie company fell 58.75p to 172.25p.

The group said most of the unused space was new as a result of the completion of a site which added 249,000 square feet to its portfolio last year.

But it has another seven buildings under construction which will add 4.3 million square feet. More than 12% is not yet covered by agreement for leases.

The group also revealed that a number of its tenants, including banking groups Citigroup and Credit Suisse First Boston, were hoping to sub-let space.

Chief executive George Iacobescu blamed the global economic downturn for difficult trading in the capital’s leasing market.

He said the take-up for the whole of Central London, including Canary Wharf’s East London site, was at its lowest level since 1992 at 9.6 million square feet.

A revaluation of its investment properties completed in December scaled down the group’s value by more than 5% or £176.1m (€257.6m).

The group heaped further gloom on investors by posting bottom line pre-tax profits for the six months to December 31 of £5m (€7.3m) – compared with £26.2m (€38.3m) a year earlier.

The drop was largely explained by a near doubling of its interest payments arising from a securitisation completed in February of last year.

But despite the gloom Mr Iacobescu said he believed the group would attract occupiers concerned with value for money.

He said: “Whilst 2003 will be another challenging year for the central London market, the Canary Wharf tower has and will, we believe, continue to attract these and other occupiers.”