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Land Securities is closing in on signing up the first tenant for their flagship City of London skyscraper, the so-called Walkie Talkie building.
The UK’s largest real estate investment trust by market value is in discussions with Kiln Group, the insurer, about its taking up a 60,000 sq pre-let agreement in the 37-storey tower, people close to the deal said. The company has only two years to run on the lease in the building in Leadenhall Street where it occupies about 47,000 sq ft.
News of the negotiations comes just a month after Costar reported that Landsecs had opened negotiations with Markel, another insurer, about the possibility of its taking up space in the 690,000 sq Walkie Talkie.
Although nothing has been agreed yet, the approaches from the two companies underlines the fast-growing presence of insurance groups in the City office market – traditionally the heartland of the UK’s banking industry – as they make the most of the supply of new buildings in Europe’s pre-eminent financial district.
British Land, Landsecs main rival, also recently announced it had struck a deal with Aon, the US insurance group, to take up 191,000 sq of space in its forthcoming Leadenhall Building development, nicknamed the “Cheesegrater”.
The two towers form part of a cluster of four skyscrapers under construction in the City. The buildings are expected to capture some of the demand arising from lease expires and breaks, which are expected to hit 3m sq a year in the City until 2017.
The developments also come as the tenant base in the City is undergoing a transformation.
Many of the large investment banks have relocated to Canary Wharf, favouring the large floor plates and ability to have all of their staff in one building. The cost of office space in the City is also a big driver. Prime office rents in Canary Wharf are at £36 per sq a year, compared with £55 per sq in the City.
The departure of many traditional occupiers has opened the door for other industries, such as technology, media and professional services businesses.
However, it is the rise of the insurance sector in the City market which has spurred on letting activity during the first half of this year. A recent report from CBRE, the estate agents, said that there are 13 insurers actively searching for a combined 1m sq of office space in central London.
The Walkie Talkie, which is unusual for being wider at its top than base, has been under construction since January 2011 and is set to be completed in early 2014.
Landsecs declined to comment.