Outpost No More: The Vision of Canary Wharf

Wait a minute. Aren't we in the midst of a soft period for commercial office property values? Hasn't demand for office space globally gone down? When it comes to Canary Wharf in London's Docklands, you can forget about how the market is supposed to act, as its stock price has increased over 50% in a week. According to Reuters, a number of prominent players including Morgan Stanley, Brascan Corp. and GE Capital are lining up to bid on the property - stock prices have risen accordingly.

To anyone familiar with the saga of Canary Wharf, this would seem improbable. For most of the 90's the complex had difficulty attracting tenants, given its distant proximity to central London. The developers had the audacity to think they could succeed in building an alternate financial district, which would compete with London for world-class tenants. The whole idea seemed absurd at the time. Initially, tenants didn't bite. However, since 1997 occupancy rates have risen dramatically.

So what's driving the demand today? Could it be that, in developing a brand new complex with its own amenities and transporation infrastructure at a distance from the central core, the developers created the perfect secondary, decentralized location for institutional tenants that, previously, would never have considered moving away from the core?