Symbolically Land Securities is now seeking a construction price for its City tower at 20 Fenchurch Street, which is nicknamed the ‘Walkie-Talkie,’ after being in limbo on the project for 18 months.

It comes at a time when take up has accelerated in the Square Mile and rents stabilised, providing a platform for the Land Securities’ scheme, and others, to go ahead. A shortage of prime offices is beginning to emerge and, at the same time, there is a hunger among investors to buy.

There is a window of opportunity to keep costs down on the 500 ft building before rising material prices, notably steel, kick in. Land Securities has always indicated it will not start development without a pre let, but it might soften this because only three major buildings are being completed in the Square Mile between now and 2012.

The fact is that the company is going ahead with three major schemes in the West End, another market with a growing shortage of major buildings.

Tony Joyce of GVA Grimley pointed out that “the first quarter take up of 195,090 sq.metres (2.1 million sq.ft.) was 53% above the 5 year average and in the second half of last year it was double January-June.” Added to that headline rents have bottomed at £457.30 a sq.metre (£42.50 a sq.ft.) and pre lets are now at £538 a sq.metre (£50 a sq.ft.).

What is encouraging is that there are some large requirements for such companies as Bloomberg, Cameron McKenna and Schroders seeking space. It seems only yesterday that analysts were writing off the City and, in particular, talking about a crisis for commercial property.

No wonder Knight Frank is forecasting double digit rental growth in central London this year because of the benefits of an upswing in global trade and financial markets. The firm’s Will Beardmore-Gray said: “Due to a lack of new development starts across London in the last two years, supply will come sharply under pressure in the next two years.”

As befits the strong market, Stenham has become an active dealer with two recent transactions.

It sold the 8,640 sq.metres (93,000 sq.ft.) 52 Grosvenor Gardens for around £40 million, a substantial profit on the £25 million purchase price of only a year ago.

Now Stenham has paid £31.3 million for 24 Chiswell Street, a 7,097 sq.metres (76,393 sq.ft.) virtual freehold in the City for a yield of 7.16%. The property is let to nine tenants, including the City University and Royal Bank of Scotland.

Andy Taylor of Stenham said: “Our core strategy will be to enhance income through active management, extending leases at, or before, expiry, undertaking a rolling programme of refurbishment and securing new tenants for the two vacant floors.”

Apart from offices and shops, hotels have also experienced a selling spree with the most recent being the Park Inn Hyde Park, a 188 room property being sold through Christie & Co for £35 million.

It is being sold by Gresham Hotel Group, now focusing more on Ireland and continental Europe. Christie’s Jeremy Hill said: “We have a number of UK and international buyers desperately keen to secure a central London hotel.”

But the real prize asset being put on the market is the Grosvenor House Hotel, once the pride of the Forte empire, which is being handled by CB Richard Ellis. It has recently had an extensive £135 million refurbishment. Yet another offering is Gloucester Capital instructing CB Richard Ellis to sell the 272 bedroom Radisson Blue, Portman Square for around £100 million and the government owned Royal Bank of Scotland seeking £220 million for the Cumberland, Marble Arch which is leased to Thistle. This is one of the top London hotels with 1,019 bedrooms and is part of a £650 million hotel portfolio.

St Martins has completed the first letting on its 150 Cheapside office block with the Canadian Imperial Bank taking 4,831 sq.metres (52,000 sq.ft.), just under a third of the space in the building. The rent is £452 a sq.metre (£42 a sq.ft.).

Kleinwort Benson is expected to lease the 4,645 sq.metres (50,000 sq.ft.) 14 St Georges Street, W1. The quoted rent is 914.60 as metre (£85 a sq.ft.).

A further sign of growing confidence is that Helical Bar has taken the 44,035 sq.metres (474,000 sq.ft.) Little Britain property in Aldertsgate Street off the market with the aim of improving the quality mainly through re-cladding.

Helical Bar is the new asset manager of the property, which has been empty since 2005 and is owned by the German bank, Hypo Real Estate.

It has been close to letting in the past, notably to Nomura. But the climate is right now with a shortage of space coming and Cushman & Wakefield viewing the best start to the year since 1998 as a signal for a surge of new development.

The number of prime properties being sold in central London is growing fast and has now topped £3 billion in the city as owners move to take advantage of a buoyant market.

The largest portfolio for sale is Simon Halabi’s Thames portfolio at £466 million. Top spot for the most expensive is the German fund Commerz Real’s 10 Aldermanbury, occupied by JP Morgan, at £260 million.

Andrew Hawkins of Jones Lang LaSalle (JLL) commented: “We expect investment volumes to be up by almost 50% in the first half of 2010 and anticipate rents going up 50% and surpassing those of the market peak in 2007.” That would mean beating £753.20 a sq.metre (£70 a sq.ft.).

One property which will test the optimism is Drapers Gardens, EC2 which has been put on the market by Canary Wharf and Morgan Stanley for £240 million, a yield of 5.25% for the 27,127 sq.metres (292,000 sq.ft.) building which is let to Black Rock Investment Management for £527.24 a sq.metre.

Among a clutch of other properties for sale is the 10,776 sq.metres (116,000 sq.ft.) 21 Lombard Street, EC3 which is being marketed by Drivers Jonas for over £103 million for a yield of 6%.

The selling bonanza is not confined to the City because a number of prime properties are being marketed in the West End, notably retail outlets such as Delancey and Shearer Group’s former Dickins and Jones department store which is up for more than £200 million, a yield of only 5%. An even lower yield of 4.75% is being applied to the Irish investor Cosgrave’s 215-219 Oxford Street at £210 million. Both are virtually fully let.

The largest purchase so far in the West End, which is larger than any since 2007, is the Lebanese group M1 paying £175 million for Moritz Group’s Victoria House, Bloomsbury Square, a mixed use property of 27,989 sq.metres (301,280 sq.ft.).

The Houses,
16-18
Blackfriars Lane,
London EC4

Location:
Situated in the St Paul’s Conservation area and close to St Paul’s Central Line Station and City ThamesLink Station.

History:
The Houses is an attractive Grade II listed building re-modelled in 1780-86, forming part of the estate around a courtyard for the Worshipful Society of Apothecaries.

Description:
Following extensive refurbishment, The Houses now provides light, bright and distinctive offices over the ground and two upper floors overlooking Blackfriars Lane and the Courtyard.

Amenities:

• Attractive period offices
• New Category II lighting
• Passenger lift
• Central heating

Accommodation:
Total space amounts to 4,603 sq.ft. over 4 floors (G-3) and is available as a whole or in part.

Contact:
Rob Rooney, Farebrother
020 7855 3550
Iain Malcolm, Farebrother
020 7855 3556

British Land is expected to get three tenants for its new completed 45,521 sq.metres (490,000 sq.ft.) Regent’s Place NW1. The Russian energy company Gazprom is believed to be taking 6,968 sq.metres (75,000 sq.ft.) while Betfair is considering a third of that amount. The much larger letting could be to the media group Aegis.

Cushman & Wakefield are forecasting that prime West End rents will rise by 40% between now and 2012. It also reckons that the lack of supply will bring more pre letting particularly as active demand has become such a feature.

The surge in demand for office space in London has included the serviced sector, epitomised by Avanta letting 50% of its available space in the newly expanded 9 Devonshire Square, EC2 property.

Devonshire Square reopened on 1 April and is the company’s second property in the City.

This experience is shared by other serviced office operators throughout the UK. Their attraction for companies is that it is easy to take space without incurring the long term liability of a lease, giving greater operational flexibility.

The encouraging point about the market rebound is that it has been broadly based to include the South Bank and Docklands. That means an increased area of the capital has its own business district, illustrated by the Shard of Glass at London Bridge.

An example of the breadth of the market is that an oil company, Shell, is leasing 23,225 sq.metres (250,000 sq.ft.) in Canary Wharf’s 40 Bridge Street, E14 having looked hard at buildings in the West End and City.

Mark McAlister of Colliers Godfrey Vaughan said: ”Shell, being a South Bank occupier, will have understood the value of the Jubilee Line, quite apart from the obvious deal making capabilities of the Canary Wharf Group and the quality of the estate.”

Another large letting in Docklands was to the Olympic organisation, LOCOG, which has taken 12,542 sq.metres (135,000 sq.ft.) at 10 Upper Bank Street, E14 from the law firm Clifford Chance.

The development in Docklands goes on with ZBV Skylines, a subsidiary of Zog Group, putting in plans for a 50 storey scheme for the Skylines Business Village designed by Terry Farrell& Partners. The scheme will include 806 residential units, a 123 bedroom hotel and a business centre.

Meanwhile, Hammerson is using Jones Lang LaSalle to sell its 45,150 sq.metres (486,000 sq.ft.) Harbour Exchange One and Two in Docklands for £145 million, a yield of 9%. It would appear that Hammerson’s new Chief Executive David Atkins is rationalising the portfolio.

Also in Docklands, Criterion Capital is considering selling its East India Dock Estate of 54,904 sq.metres (591,000 sq.ft.). It is likely to be priced at around £200 million for a 6.1% yield. Savills’ James Crawford said: “East India Dock is a high quality, fully let estate principally occupied by three substantial covenants off very low rent, offering opportunities for lease renegotiation.”

The strength of the London commercial property market has attracted a flow of new investors and developers, one of the latest being the Brookfield Properties Corporation (BPC) which has become part of a joint venture with Great Portland Estates. That means it is buying into a 71,482 sq.metres (769,447 sq.ft.) project for a 40 storey property at 100 Bishopsgate. This will have offices, a library and retailing together with a smaller building for offices and new Livery Hall for the Worshipful Company of Leathersellers. Brookfield owns a number of prime properties in North America, including the World Financial Centre, New York and Brookfield Place, Toronto.

Where are the pundits now who forecast the collapse of the commercial property market and the diminution of the City? Of course values fell and development slowed but it was a fast reaction to the realities of the market. Now lettings have increased fast, rents have stabilised and will soon rise and the City financial institutions are recruiting again.

The gloom and despondency came from various sources, not least being the media who fail to look at history or understand the nature of the property industry. They should study the top companies like British Land and Land Securities and see the timing of the market in getting out and coming back in. Or the experienced investors like Raymond Mould and Patrick Vaughan who were the first to spot the opportunities from low prices and enforced sales.

Also in the equation was the City of London with its vast portfolio which has the vision and experience to get its timing right. The point is that property is like any other market, there are times to buy and times to sell. The problem this time round is that idiots advised other idiots to borrow and put their money into commercial property.

Many of them are now nursing their depleted bank balances and are unlikely to venture into the market for a long time. Commercial property has become more sophisticated and is not a playground for the uninformed.