Land Sec Ponders Walkie Talkie Restart

Almost 18 months after the bottom fell out of the financial market it's become clear the world hasn't ended and that London's property developers acted perhaps too quickly in canning developments in the face of the perceived risk of the day and although we may end up in a double dip recession, an actual economic depression is not on the horizon.

Now there is a serious threat to the city of London, not from banking regulations, but under-supply of suitable floor space with only a handful of office buildings such as the Heron Tower having started in the past 18 months - indeed, figures from CB Richard Ellis show development is at a lower rate now than any time since they started counting it in the City in 1984.

Most of the recent activity in the office sector carried out by Land Securities in the capital in terms of transaction size has been on selling off existing properties to generate cash and reduce debt.

At the same time it is becoming clearer on when the next property cycle will peak and developers are starting to look towards that. Perhaps the clearest indication of this yet is the reports Land Securities is to restart its project for 20 Fenchurch Street, a 160 metre tall skyscraper dubbed "the Walkie Talkie" thanks to its telephonic appearance.

With this news, it seems likely that 20 Fenchurch Street should start to move forward with an aim of being completed in about 2013 or 2014 when demand is still very restricted meaning that Land Securities will be able to charge handsome rents for the building simply because demand will dwarf supply by a large factor.

The first steps will include making sure the fundamentals of the economics still add up, and perhaps drafting minor design revisions if they do, rehiring the design and engineering staff who were stood down, and approaching contractors to get them bidding again on the contracts. With the current lack of work in the sector and reduced commodity prices since 2008 this should net Land Securities some major savings in construction and material costs.

Another stalled project developed by Land Securities that could also get off the drawing board is the Oxford Street sited Park House designed by Hamiltons, although like 20 Fenchurch Street, Land Securities has yet to pencil in anything approaching a solid start date.

In both cases it shows that the larger end of the property market is starting to approach the light at the end of the tunnel, even if it has yet to reach it.