Canary Wharf is soaring to new heights

With the Olympics in town, east London is set for a year like no other. But for all the glitz of the greatest show on earth, a far more significant regeneration project takes its next evolutionary step in 2012 as the landlord behind Canary Wharf plots the next stage in the development of its sprawling estate.

Canary Wharf Group yesterday struck a deal to take control of the 4.8 million sq ft Wood Wharf site next to its main nexus of towers and shopping centres, paying £90m to buy out partners British Waterways and developer Ballymore.

Bringing the Richard Rogers-designed masterplan for Wood Wharf to life over the next ten years will increase the size of its overall estate by a third, and bring an extra 20,000 jobs,

The company's move contrasts with more downbeat property news this week as law firm CMS Cameron McKenna pulled out of developer Hammerson's Principal Place scheme, setting back its plans for the skyscraper on the fringes of the City. But out east, Canary Wharf now hosts nearly 100,000 workers, a figure set to double by 2025. Shopping malls with bars and restaurants cater to visitors as well as workers. Echoing the global economy, the activity underlines how London's centre of gravity is shifting east over a generation of rapid change.

Thirty years ago London's Docklands epitomised inner-city decline. Despite a proud history stretching back nearly 200 years, the writing was on the wall for at least a decade before the West India Docks finally closed in 1980 as competitors caught up with the Isle of Dogs. Bigger ships didn't want to travel as far up the Thames, thousands of dockers were thrown out of work by the rise of container shipping and the area's poor transport links with the rest of the capital were cruelly exposed.

When Margaret Thatcher set up the London Docklands Development Corporation in 1981 and declared the Isle of Dogs an enterprise zone to draw in investment, the odds were still stacked against the Docklands. And the ride hasn't been a smooth one after a property crash tipped original developer Olympia & York into bankruptcy in 1992.

But thanks to vastly improved transport links, its successor Canary Wharf Group has developed more than 15 million square feet of offices in the past 20 years, far more than any other developer, and become a global banking hub to rival the City.

The wave of mergers triggered by the Big Bang deregulation of financial services in the late 1980s triggered demand for bigger buildings and open plan trading floors, space which simply wasn't available in the nooks and corners of the old City. But at Canary Wharf there's plenty of room for the bulge-bracket banks to spread out: JPMorgan is set to become the latest to move there this year, taking up the former UK home of collapsed Lehman Brothers in Bank Street.

Price and transport remain chief attractions as well as size. Anthony Duggan, a partner at Drivers Jonas Deloitte said: "If you're looking at prime office space in the City you're looking at rents of around £55 per square foot, compared with the mid-forties for a new building down at the Wharf. You've also got great transport down there, the buildings are of a very high quality, and the area has now got quite a good social scene. It's not just a tower in the middle of a wasteland."

The 1.5 million square feet earmarked for hundreds of new flats across six buildings at Wood Wharf are likely to get the go-ahead before the offices, which will need major pre-lettings before being built. The residential emphasis also marks CWG's latest efforts to diversify away from more cyclical office development.

But then CWG has been stepping out of its usual comfort zone for a while, building the Walkie Talkie skyscraper in the heart of the City and last summer winning the race to overhaul oil giant Royal Dutch Shell's monolithic South Bank headquarters. The former upstart of dowdy east London is coming of age.

From docks to offices: The key dates

1802: West India Docks open

1930s: Port of London employs 100,000 workers

1970s: Docklands lose 150,000 jobs

1980: West India Docks close

1981: London Docklands Development Corporation established

1982-5: Canary Wharf office complex proposed

1987: Docklands Light Railway opens

1988: Construction begins at Canary Wharf

1991: First Canary Wharf tenant moves in

2005: CWG named to redevelop Wood Wharf

2012: CWG takes complete control of Wood Wharf development site