JPMorgan Chase is close to axing plans to build a £1.5 billion ($2.4 billion) European headquarters in Canary Wharf, opting instead for the former UK premises of Lehman Brothers.
The bank’s strategy for London has been the subject of intense speculation amid concerns that the abandonment of the 1.9 million square?foot Riverside South project would reflect broader industry unease about UK regulatory and tax policy in the wake of the financial crisis.
But JPMorgan has sought privately to emphasise the decision would be driven by its business and financial needs rather than the political landscape. JPMorgan’s 17,000 UK-based staff are scattered across the City.
Moving to the former Lehman tower in the centre of Canary Wharf is a cheaper option than building the sprawling, two-tower Riverside South project on the south-west side of the Docklands financial district.
The Lehman office space, at 25 Bank Street, is considered among the best in London, having been purpose-built for the collapsed US investment bank in 2004.
The 33-storey building includes large trading floors crucial to JPMorgan’s operations and is thought to require minor refurbishment before it could be reoccupied by a bank.
Rent for the premises is covered for almost four years under a Lehman-related guarantee underwritten by AIG , which would be an attractive incentive in a longer-term deal.
People close to the negotiations said no contract had been signed, and that JPMorgan could still change its plans unexpectedly.
While smaller than Riverside South, at about 1m?sq?ft, 25 Bank Street would represent long-term commitment to London as a centre for JPMorgan’s international business.
Speculation that the bank was considering reducing its investment in the UK first surfaced last year when Jamie Dimon, JPMorgan’s chief executive, telephoned Alistair Darling, then chancellor, to voice his displeasure at the imposition of a one-off “supertax” on bonuses.
But senior JPMorgan bankers say speculation that the bank threatened to relocate large chunks of its business out of London was overblown.
JPMorgan paid the Canary Wharf Group £237 million in 2008 for a 999-year leasehold interest on the Riverside South site.
Scrapping the project now, after initial groundwork has been completed, would cost the bank a total of about £300 million in fees and associated costs, although it could recoup some of that money by selling its interest back to CWG.
Discussions are under way to move tenants that currently sublet office space in 25 Bank Street to other premises, leaving the space clear for JPMorgan to agree a deal without any conflicting lease obligations, according to the people close to the negotiations.
JPMorgan declined to comment.