London property market hit as major project stalls

LONDON Mon Jan 16, 2012 12:29pm GMT

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LONDON Jan 16 (Reuters) - London's commercial property market suffered another major setback as a deal fell through to let one of the biggest future office schemes in the City financial district.

Anglo-French developer Hammerson said law firm CMS Cameron McKenna has pulled out of talks to pre-let a third of the 600,000 square feet, 485 million pound ($741 million) Principal Place scheme in Shoreditch, which a source said will delay the April start date for construction.

The central London commercial property market, which rallied between summer 2009 and autumn 2011, is now starting to feel the effects of economic uncertainty.

Five central London skyscrapers being developed by firms including Land Securities and British Land have only signed one office pre-let deal between them.

London developers are looking to exploit a shortage of top quality offices in the City district but have struggled to attract tenants amid the global financial turmoil.

"I have consistently said that in current conditions we would not expose our shareholders to excessive risk through building London offices on a speculative basis, which remains our policy," Hammerson's Chief Executive David Atkins said in a statement on Monday.

At 1123 GMT, shares in Hammerson were down 0.7 percent, underperforming a 0.3 percent fall in the broader index of UK property stocks.

"If this means Cameron McKenna are definitely out of the market rather than going somewhere else it doesn't bode well for City tenant demand this year," said Alan Carter, an analyst at Investec.

Wealth manager Schroders shelved a deal to move into the Walbrook building near the Bank of England at the eleventh hour recently due to the uncertain economic outlook. ($1 = 0.6542 pound) (Reporting by Brenda Goh; Editing by Chris Wickham)

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