Monday, 15 November 2010

Minerva missing out on £1.8m a month with still vacant Walbrook office scheme

Shares in troubled developer Minerva tumbled last week after news of a major letting at either of its Walbrook or St Botolph schemes in the City was not forthcoming in the firm’s interim management statement. Whilst the St Botolph Building remains only 45% let, the flagship Walbrook Building has remained empty since it achieved practical completion in February this year, something that is clearly spooking investors and raises the question, why?

The Foster & Partners-designed building, which stands opposite Cannon Street station has much in its favour, boasting large floors from 35,000 to 50,000 sq.ft. with the potential for one of the largest single trading floors in the square mile, seen as vital in attracting potential occupiers. The developer has even ditched their previous joint letting agent Cushman & Wakefield and replaced them with CB Richard Ellis; it would seem however, without success.

The picture at the 560,000 sq.ft. St Botolph Building is somewhat rosier, with global insurance broker, Lockton having now moved approximately 600 staff into the first and second floors of the 13-storey office. The American firm has taken 84,000 sq.ft. of space on a 20-year lease at a rent of £45.00 per sq.ft with an option to take a further 40,000 sq.ft. at a later date. They will soon be followed by international law firm Clyde & Co, who pre-let 145,000 sq.ft. across levels 10 to 13 at an initial rent of £48.00 per sq.ft. also on a 20-year lease but with a rent free period of 36 months.

Whilst there is an increasing shortage of large, Grade A office space Minerva are now claiming that occupier demand is focused on the sub-100,000 sq.ft. space requirement. This may suit the seemingly multi-tenant St Botolph scheme, which Minerva are actively marketing on a floor by floor basis, but not the Walbrook, which it is hoped can still attract a single occupier. There are several firms in the City with new space requirements for 250,000 sq.ft. and above, whilst Blackrock’s recent 292,000 sq.ft. letting of Drapers Gardens shows that the appetite for large deals is there.

In their review of the City of London office market, Minerva state that they expect prime rents in the City to reach £52.50 per sq.ft. by the end of 2010, and this is where it would seem potential tenants disagree. By their own acknowledgement, Minerva is missing out on a monthly income of around £1.8m for the Walbrook alone, or a total of £16m since the building completed. Whilst the developer has made it clear it won’t be rushed into any deal on the back of a long running dispute with rebel investor Nathan Kirsh, time is money and Minerva may soon find themselves running out of both.

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