Calling off the search – CC to reap benefits from Canary Wharf sublet deal with TfL
Clifford Chance (CC) has edged a step closer to subletting out six floors of empty office space in its London headquarters, with Transport for London (TfL) in talks to take the space in a deal that could save the firm millions in rental income each year.
March 20, 2014 at 09:13 AM
4 minute read
Clifford Chance (CC) has edged a step closer to subletting out six floors of empty office space in its London headquarters, with Transport for London (TfL) in talks to take the space in a deal that could save the firm millions in rental income each year.
The transport body has put in an offer to take over roughly 220,000 sq ft of CC's 10 Upper Bank Street building in Canary Wharf – equating to six of the tower's 30 floors.
The offer has yet to be agreed by TfL's board, but if the deal goes ahead it will end the firm's hunt for a tenant, which has been going on for more than 18 months.
CC has been scrambling to fill the empty space since the London Organising Committee of the Olympic and Paralympic Games (LOCOG) moved out in the months following the 2012 Olympic Games.
The space was last year described by one CC partner as attracting "nothing more than a few nibbles here and there" from prospective tenants.
While the floors have been sitting empty the magic circle firm has been missing out on millions in rental income, with property advisers CBRE and GVA's websites listing rental rates on the building at £39.50 per sq ft annually. CC appointed the pair to market the space in 2012.
If TfL agrees to pay rent at this rate for all six floors it would bring in around £8.7m a year for CC. In comparison, LOCOG had 135,000 sq ft in the building, which it moved into in 2010. TfL will reportedly start moving into the offices in September 2015, with some 3,000 staff to occupy 2,500 desks in the building.
"Having a subtenant would make a difference to our profitability and go a long way in reducing overheads," comments one CC partner. "We've been trying to do something about this for a while, so we are keeping our fingers crossed that there will be good news."
The firm also sublets space in its building to MasterCard, Infosys, Total and the FTSE Group.
TfL, GVA and CBRE declined to comment. A spokesperson for CC says: "It has always been our policy to market excess space at our offices in Canary Wharf. We have a landmark building in a major business centre and often show prospective tenants around."
When CC moved into the building in 2003 it became the first UK law firm to take up residency in Canary Wharf. Magic circle peer Allen & Overy (A&O) followed suit in the same year when it took up more than 75,000 sq ft across four floors at neighbouring 40 Upper Bank Street.
However, A&O chose to vacate the office in 2010, enlisting property advisers Knight Frank, DTZ and Strutt & Parker to market the space. Like CC it has faced a protracted search for tenants, with the firm finally offloading the bulk of its space last summer to office provider i2 and venue provider CCT Venues, which signed up for around 19,500 sq ft each.
The firm sublet a further 14,120 sq ft last month to management company Carlson Wagonlit Travel and national firm Prolegal Solicitors, while Oracle Financial Services leased more than 10,000 sq ft in 2011. A&O is still trying to offload 12,100 sq ft across two floors priced at £35 per sq ft, according to marketing material.
"From our perspective two years is on the longer end of the time it usually takes to find a subtenant," says Bradley Baker, Knight Frank's head of central London tenant representation.
"Take-up at Canary Wharf has been weak over the last few years but this began to change around a year ago, with tenant confidence levels returning. The market is beginning to shift in central London generally, and Canary Wharf is now in a situation where rents for tenant-released space are in the mid-£30s per sq ft, compared with the City, with prices at around £60 per sq ft."
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