Page last updated at 11:12 GMT, Thursday, 14 August 2008 12:12 UK

Slump delays 'Cheesegrater' plans

An artist's impression of the 'Cheesegrater'
The Cheesegrater would be the tallest building in the City of London

British Land will delay the development of the Leadenhall Tower in London's financial district, nicknamed the Cheesegrater, by at least a year.

The firm blamed weak demand for office space and rising construction costs.

British Land said the building would be completed in 2012 when letting prospects should have improved.

UK housebuilder Bellway added to the gloomy news from the property sector when it said reservations for new homes fell 45% in the six months to 31 July.

Weak demand

British Land said the value of its multi-billion pound property portfolio slipped 5% in the three months to the end of June.

Bellway has today set the scene for what is likely to prove a highly bleak half year results season for the UK housebuilders over coming weeks
Keith Bowman, Hargreaves Lansdown Stockbrokers.

The firm's chief executive Stephen Hester said that weaker demand had started to hit office rents but retail rents were still growing.

Mr Hester said the delay to the 47-storey Leadenhall Tower would improve its letting prospects. he said it would be a "premium building" and attract "premium rents".

The building is designed by Richard Rogers and would be the tallest tower in the City of London.

However, demand for office space has dropped recently as struggling financial institutions shed staff and look to cut costs.

One of the City's largest tenants, JP Morgan, said recently it would move to rival Canary Wharf.

Profits squeezed

Bellway said it had completed 6,556 homes in the 12 months to the end of July, down 14.2% from the year before.

The houses fetched an average price of 169,000, down from 173,300 the year before.

"Bellway has today set the scene for what is likely to prove a highly bleak half-year results season for the UK housebuilders over coming weeks," said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.

"Profit margins are being squeezed via a potent combination of increased sales incentives and costs relating to emergency restructuring issues - for many housebuilders, this has included significant job cuts."

Bellway said it had offered customers discounts to sustain sales.

Housebuilders Barratt, Bovis Homes and Redrow have announced thousands of job losses as the housing market downturn hurts their businesses.

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