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Land Secs hedges bets on tower

Developer delays procurement decision on ‘Walkie Talkie’ at 20 Fenchurch Street in the City to contain costs

The UK’s largest developer is planning to use the predicted downturn in the City office market to squeeze a better deal out of contractors chasing one of its flagship tower projects.

Land Securities has said it will wait until the end of the year to decide on its delivery method for its 20 Fenchurch Street office tower scheme, known as the ‘Walkie Talkie’.

The strategy is bad news for Mace, which had been tipped as preferred contractor to build the Raphael Vinoly-designed 36-storey tower.

Last summer, the firm appeared to have unseated previous favourite Bovis Lend Lease from the £205 million deal when the scheme got called in by the then communities secretary Ruth Kelly over fears about its height.

Now the developer’s director of projects, Steve McGuckin, has said Land Securities will use the delay to try to contain possible cost increases.

He added: “We are doing demolition on site at the moment. It is a tricky job that will take time so we have until the end of the year to take a decision.

“We are keeping our powder dry. In a year’s time firms may be prepared not to put in a premium price for the job.

“The main thing is to get the supply chain involved so they know what they are bidding for. That means we can get real prices before we have to make a go/no-go decision.”

The firm made a start on £1 billion worth of work last year but Mr McGuckin said its project delivery would slow in 2008 - but added that it had not postponed any planned projects.

The firm is in negotiations with Westminster City Council over planning for a massive redevelopment in front of London’s Victoria Station.

Mr McGuckin said one of the key challenges for the project, a near 150,000 sq m mixed use development with eight buildings of up to 40 storeys, will be the below-ground works as the site runs over various underground services including the Tube.

He said Land Securities will start talking to firms about this element of the project this year, adding Balfour Beatty, Costain and Taylor Woodrow were among those who had the capability to carry out the job.

And the developer is expected to make a decision very soon on the appointment for a £150 million deal to extend the Buchanan Galleries shopping centre in Glasgow.

Miller, Sir Robert McAlpine and Bovis Lend Lease - which built the original centre in 1999 - are in contention for the deal, being let with joint developer Henderson. Work will start later this year for completion in 2011.