London's "Cheesegrater" tower filling up with insurers

LONDON Mon Dec 17, 2012 8:22am GMT

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LONDON (Reuters) - Lloyd's of London insurer Amlin is to rent eight floors in the so-called Cheesegrater, a skyscraper being built in the City financial district in London, highlighting a growing split in the property market.

Amlin will rent 111,000 square feet from developer British Land and Canadian partner Oxford Properties from March 2015 for an undisclosed rent, the firms said on Monday.

It is the latest in a series of companies to take space in The City's insurance district, a trend in stark contrast with the dead market for bank lettings.

It means the 224-metre tower will be at least 51 percent full when it opens in 2014. Its official name is the Leadenhall Building but the building has been termed the Cheesegrater because of its tapering wedge shape that narrows at the top to avoid blocking views of sites such as St Paul's Cathedral.

The tower is located in the EC3 postcode district, an area popular with the insurance industry because of the proximity of the Lloyd's of London building.

While agreeing a deal so far from completion will be welcomed by British Land shareholders because it lowers the risk of having an empty building, it also implies the terms offered - such as the rent-free period - were generous, Investec analyst John Cahill said.

"The incentive is to get the building filled up rather than hold out for higher rents, which is a more sensible use of shareholder funds. The rent is probably somewhere in the middle of the 45 pounds to 65 pounds per square foot range."

Large investment banks that have traditionally occupied much of the space in the City, an area of around a square mile roughly centred on the Bank of England, are slashing jobs, reducing their need for offices.

The insurance sector, by comparison, is doing relatively well due to its counter-cyclical nature.

Last month Land Securities and Canary Wharf Group, majority owned by Songbird Estates, said it let 30,000 square feet in the nearby Walkie-Talkie skyscraper to Lloyd's syndicate Ascot Underwriting.

U.S. insurer W.R. Berkley is also planning to build its own 40-storey skyscraper in the City.

Developers are faring worse elsewhere.

A skyscraper at 100 Bishopsgate is still hunting for its first letting to trigger construction and the nearby Pinnacle skyscraper has stalled as a stump in the ground after failing to sign a major tenant against the backdrop of a legal row between the developer and builder.

On the south side of the Thames, the Shard, the European Union's tallest skyscraper, has failed to sign an office tenant since opening to great fanfare in July.

(Editing by Dan Lalor)

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