JPMorgan, Shell influx spurs Canary Wharf retail growth

LONDON (Reuters) - Property developer Canary Wharf Group will add 43,000 square feet of underground shopping space to the east London financial district it controls to capitalise on an influx of thousands more office workers by 2012.

The company, which is also in talks with Apple Inc APPL.O about opening its first store in the area next year, will knock through two levels of car park space to increase the size of the Jubilee Place mall by 50 percent by 2013, Camille Waxer, who is in charge of retail at Canary Wharf, told Reuters.

"It was the right time," she said, citing the arrival of about 10,000 staff from Royal Dutch Shell Plc (RDSa.L) and J.P. Morgan (JPM.N) by 2012, swelling the number of workers in the district to 105,000.

Although planning consent for the extension was given in 2008, the project was put on ice after the collapse of Lehman Brothers. Last month, Lehman agreed to pay Canary Wharf (majority owned by Songbird Estates Plc (SBDE.L)) $780 million (487 million pounds) to cover costs after its collapse that included lost rent.

The Jubilee Place extension will increase the company's 550 million pound retail estate to about 713,000 square feet. With the completion of the Crossrail station in 2018, a further 100,000 sq ft could be added, Waxer said.

Canary Wharf's office skyscrapers dwarf the size of the retail units, with 15 million sq ft housing occupiers such as HSBC Holdings Plc (0005.HK) (HSBA.L), Citigroup (C.N), and Barclays Plc (BARC.L)

Waxer said the area's stores had been relatively resilient during the economic downturn, which has seen UK town centres grappling with dismal vacancy rates.

Apple is in talks over a possible 10,000 square feet site though its location is undecided, she said. The technology company already has five stores in London.

RETAIL EXPANSION

Rents for so-called zone A areas in the front of shops are about 350 pounds per square foot in Canary Wharf versus 220 pounds in the main City of London financial district, said David Kenningham, executive director for retail at property broker CB Richard Ellis Group. (CBG.N)

"A lot of retailers want to go to Canary Wharf," he said, citing its strong weekend trading. "The concern may be that rents temporarily soften if the opening of the Stratford City mall draws weekend shoppers away," he told Reuters.

The Stratford mall, the largest of its type in Europe, is due to open next week.

Jubilee Place, which at 90,000 sq ft makes up about 15 percent of Canary Wharf's retail estate, currently houses stores such as fashion retailers Whistles and French Connection as well as eateries Wagamama and Nando's.

The extension will hold 40 shops, for which Canary Wharf is looking to fill with tenants that are "not luxury, but not mid-market" that would typically include brands like Monsoon and Top Shop. It will cut the number of parking spaces from about 500 to just under 200, Waxer said. Parking space will be added elsewhere to compensate for the loss.

Canary Wharf's retail portfolio had an equivalent yield -- which takes into account projected rental income -- of 5.4 percent at December 2010. The Canary Wharf Group-owned estate accounts for the bulk of the current 790,000 sq ft of retail space in the financial district.

Future plans to dig underground for retail space were limited, Waxer said, due to a lack of space and the presence of Grade I-listed walls that formed the foundations of the old West India Docks on which Canary Wharf was built.

(Reporting by Brenda Goh and Tom Bill. Editing by Jane Merriman)