Canary Wharf Group Gets Green Light for Shell Project

By Dow Jones Business News, 
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LONDON--Canary Wharf Group has received government approval to go ahead with one of central London's biggest real- estate developments--a GBP1 billion ($1.68 billion) project centered on the U.K. base of Royal Dutch Shell PLC on the south bank of the River Thames.

The 1.4 million square-foot Shell Centre project--a joint venture with the real estate arm of Qatar's sovereign-wealth fund--was approved by local authorities last year, but was called in for review by the U.K.'sDepartment for Communities and Local Government in September, casting doubt on whether the project would go ahead as planned.

With this approval now in place, construction can start in late summer, Songbird Estates, Canary Wharf's controlling shareholder, said Friday.

"We feel privileged to have this opportunity to play a role in regenerating this popular but somewhat neglected area of London," said George Iacobescu, chairman and chief executive of Canary Wharf, who led the transformation of London's Docklands district into a financial center in the 1990s.

It will take six years to finish building the project, which will comprise 800,000 square feet of office space, 80,000 square feet of retail and leisure space, and 877 new homes, Songbird said.

Once the vacated buildings next to Shell's 27-storey tower block have been demolished, the first task will be to construct the oil giant's new office space, said John Pagano, Canary Wharf's managing director of development. The 245,000 square feet of offices and trading floors planned for the oil giant will gather its 4,000 London-based staff together on South Bank for the first time.

"We have a contractual commitment with Shell to build them an office building, so that will be one of the first deliveries," said Mr. Pagano, adding that some residential units could go up at the same time.

"The South Bank market is performing very well so we're very confident in the attraction of the rest of the commercial space," he added.

Takeup of office space in the district--better known as the home of the Tate Modern, the Royal Festival Hall, and Shakespeare's Globe Theatre--doubled in 2013, real estate adviser Knight Frank said in March.

A company which sums up the lure of one of the area is Ogilvy & Mather, currently a Canary Wharf tenant in Docklands-- the advertising firm plans to move into a new office by the Thames next year. Other firms relocating their U.K. operations to the South Bank include News U.K.-- a unit of Wall Street Journal parent News Corp.-- and Doha-based broadcaster Al Jazeera.

In his report approving the development, U.K. Communities Minister Eric Pickles said: "The proposed development would enhance its surroundings and the character of the South Bank."

The approval was one of two Canary Wharf Group was waiting for, to confirm its status as a residential developer as well as a builder of offices. It submitted a revised planning application for Wood Wharf, a 4.9 million square-foot development in Docklands, including 3,000 homes in December.

Canary Wharf isn't the only major U.K. developer lured into the residential property market by central London's soaring house prices. Other large developers, including Land Securities and British Land Co., have also shifted gear, building apartments along with office blocks.

In its full-year results in May, Land Securities--the U.K.'s largest commercial developer--hailed "the price point of residential sales" as it reported that it presold 73% of 270 apartments to be built at developments in Kings Cross and Victoria. It recently secured permission for a further 206 units at another London development.

Canary Wharf Group was also involved in building the London skyscraper known as the Walkie Talkie, which it developed with Land Securities PLC.

Art Patnaude contributed to this article.

Write to Ed Ballard at ed.ballard@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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