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By Brenda Goh
LONDON, May 29 (Reuters) - A Chinese developer has signed adeal to convert a derelict plot of land next to London's CityAirport into the British capital's third financial districtaimed at Chinese firms and worth an expected $1.5 billion whencompleted.
The 35-acre site at the Royal Albert Dock, industrial landcurrently strewn with empty warehouses and unused docks, will beredeveloped by Advanced Business Park (ABP) and Britishdeveloper Stanhope into a 3.2 million square feet complex ofoffices, homes and shops that will house mainly Chinese firms.
"Creating a third financial district in the capital, thisdevelopment will act as a beacon for eastern investors lookingwest, bringing with it tens of thousands of jobs and billions ofpounds of investment for the UK economy," London Mayor BorisJohnson said at an event where the deal was signed.
The scheme is the first project outside China for ABP, which has built a 15 million square feet business park in south westBeijing and is building two others in the coastal city ofQingdao and Shenyang in north-east China.
It is targeting Chinese and Asian businesses looking to setup in Europe, believing this will provide a strong source ofdemand at a time when many European and U.S. firms are shelvingoffice moves against a shaky economic backdrop.
The company will develop the site in five phases at a costthat was not disclosed. It will build a minimum of 600,000square feet in the first phase and will receive the freeholdonce the complex is completed by 2021/22.
ABP has yet to sign up tenants for the scheme but has seenstrong interest from Chinese firms looking to take space, ABP'sChairman Xu Weiping told Reuters. It hopes to sell 70 percent ofthe space to Asian firms, as Chinese companies prefer to ownrather than rent their offices, he said.
The Royal Albert Dock, which opened in 1880, was onceBritain's largest and is one of three docks in east London whichthe mayor has pegged for regeneration.
The city hopes to emulate the eventual success of the97-acre Canary Wharf financial district that was built on thecity's docks in the 1990s. Its skyscrapers now house investmentbanks such as Barclays and Morgan Stanley, aftera difficult spell during which its developer went bust.
The Royal Albert Dock is connected to the rest of London bya light railway and its transport links will further improvewhen the Crossrail scheme opens in 2018, Johnson said, addingthe development would likely provide about 20,000 jobs.
London is keen to regenerate derelict sites around itseastern waterways in the aftermath of last year's Olympic Gamesand in March said it was hunting for a developer to build afloating village on the River Thames.
But the deal comes amid slumping demand for space in theCity and Docklands (Canary Wharf) financial districts asBritain's economy struggles to recover from the financialcrisis. The Shard, Western Europe's tallest skyscraper, has yetto announce an office tenant after opening in July last year.
About 9 percent of Docklands offices are vacant while 6.5percent of City offices are empty, April data from CBRE showed. This compares to 3.4 and 3.5 percent respectively inlate 2007 before the financial crisis.
Sovereign wealth fund China Investment Corporation owns astake in Songbird Estates, the majority owner of CanaryWharf.
