Keep business in the City, Cassidy says: Corporation of London stirs up row with owners of Canary Wharf

THE Corporation of London tried this weekend to defuse a simmering row with the new owners of Canary Wharf but instead underlined tensions by appearing to dismiss the London Docklands development as an unsuitable site for the headquarters of large financial institutions.

Michael Cassidy, head of the Corporation, which owns about a fifth of the freeholds in the City of London, said it was important to sell London to foreign investors as a unified business district. But he added that it was vital to keep the financial markets in the City, where top people could remain close to the markets and each other.

'It is perfectly natural that different districts offer different terms and there is local competition,' he said. 'But dealers need to meet face to face. The telephone is not enough.'

His remarks struck at the heart of Canary Wharf's marketing push to portray itself as an alternative to the City where companies could rent state-of-the-art space at a fraction of the cost.

He was said to have been stung by comments by Sir Peter Levene, chairman of the consortium of banks which recently rescued Canary Wharf from its administrators, suggesting that total occupancy costs - rent, plus rates and other service charges - at the Docklands site were only half those in the City.

Sir Peter insisted that the presence of Morgan Stanley and Credit Suisse First Boston in Docklands was evidence that Canary Wharf should not be viewed as a central London alternative to greenbelt overspill towns like Bracknell, as Mr Cassidy seemed to have suggested.

Mr Cassidy did not dispute the price differential between the City and Canary Wharf, but he pointed out that rates in the City were still pinned to the rents being achieved by landlords five years ago at the height of the property market boom in London. But City rates were poised to fall by as much as 60 per cent this year, he said.

Tenants are only just starting to pay rates at Canary Wharf because of an extended holiday on the charges designed to encourage new occupiers into Docklands.

The continuing tension between the City and Docklands - the Corporation's joint sales pitch with the London Docklands Development Corporation at this year's Cannes property conference is seen as an uneasy marriage of necessity - comes as Canary Wharf announced it is now more than 50 per cent let.

Sir Peter said the infrastructure was now in place to make a success of the development, which has been dogged by poor road connections, no tube stations and a widely derided urban light railway.

The former president of the Royal Institution of Chartered Surveyors has poured cold water on hopes for the imminent recovery of the European property market by suggesting that structural changes in the way people work will cause a marked reduction in the number of offices that will need to be built.

Christopher Jonas told the Marche International des Professionnels de l'Immobilier property conference that portable computing and the white-collar recession could undermine the calculations of property developers.

(Photograph omitted)