FALL OF A REAL ESTATE GIANT : London Wharf Project Adrift in Troubled Waters

Canary Wharf was touted as the largest urban renewal project in Europe, a “Wall Street on the water,” the shining jewel in the crown of London’s rebuilt waterfront.

Instead, the 91-acre office and retail complex along the Thames River has been a costly millstone around the neck of Olympia & York, its Toronto-based developer. The firm has at least $2 billion invested in Canary Wharf--with little to show in return.

Though Canary Wharf has not yet been included in Olympia & York’s recent bankruptcy filings, the project has proved ill-timed and been a severe cash drain for several years. The first tenants arrived last August amid London’s worst property slump since World War II, and the complex remains 40% unleased.

According to its original timetable, Canary Wharf was to have 26 buildings by 1997, with 10 million square feet of space and 50,000 workers as part of what its promoters called the “new business city of Europe.” The $7-billion complex was to be lavishly landscaped and was to include 200 shops and a 400-room hotel.

But instead of giving London a viable new financial center and providing its historic docks a new long-term lease on life, Canary Wharf has yet to really take off.

The depressed real estate market caused many firms to rethink their plans of relocating there from the City of London, the current financial district.

Canary Wharf’s primary attraction was that it was leasing office space for $50 a square foot--less than half the City of London’s price in the late 1980s. But as real estate values plunged, so did city office rents, and that cost advantage vanished.

Canary Wharf is also located on an isolated bend in the Thames River--known as the Isle of Dogs--that is hard to reach. Traffic jams curse the routes leading to the area, while a new connecting transit train has been hampered by breakdowns and delays.

Canary Wharf is part of what is known as the Docklands redevelopment zone, which stretches about eight miles along the Thames. The docks along the river were built from marshlands in the 18th Century to accommodate Britain’s booming overseas trade.

The area went into decline when the ships moved to the container port of Tilbury after World War II.