CANARY WHARF, the docklands developer that was taken over by Morgan Stanley’s Real Estate Fund in a £1.7 billion deal earlier this year, is planning to sell off one or two buildings at its East London estate to cash in on runaway demand for commercial property investments.

The company will today announce to the London Stock Exchange that it has received a string of opportunistic offers for parts of the estate from a mixture of funds, private companies, institutions and overseas investors and that it is now considering its options.

Sources close to the process insisted that the move did not mean that Canary Wharf was planning an extensive sell-off or a fire sale.

In the past 12 months demand for commercial property has risen to unprecedented levels. CB Richard Ellis, the world’s biggest commercial property consultancy, predicts that £35 billion of commercial property will be sold in the UK this year — which would be a record figure.

The proposed disposals come almost a year after Canary Wharf sold the Citigroup Tower at 25 Canada Square and a building at 5 Canada Square let to Credit Suisse First Boston for £1.1 billion.

Once Morgan Stanley had completed the takeover of Canary Wharf in May, John Carafiell, head of European Real Estate for Morgan Stanley told The Times that he had no plans to liquidate the estate, although the company refused to rule out individual asset sales where appropriate.

It is thought unlikely that the original Canary Wharf tower will be sold.

Property sources said that selling some properties may help to boost the price of ‘B’ shares in Canary Wharf, which are listed on the Alternative Investment Market, by proving that it is a private equity style investment.

Despite continued weakness in the office leasing market in London, Canary Wharf has benefited from the improving fortunes of the large global investment banks that inhabit the estate.

Research from CB Richard Ellis, shows that Canary Wharf has about 1.2 million sq ft of empty space still on its books, including 329,743 sq ft in the Barclays Bank headquarters. However despite the large amount of empty space, vacancy levels at the Docklands site are now just under 10 per cent, below the 14 per cent vacancy rate in the City of London.

In September, Canary Wharf reported that losses on ordinary activities before tax had widened from £13.2 million to £23.7 million. However, operating profits for the year to June 30 rose by £22 million to £184.4 million, despite costs of £23.6 million relating to the takeover battle.

News of the potential building sales came as it emerged last night that Morgan Stanley is expected to make a fresh offer to Paul Reichmann, the founder of Canary Wharf, for his warrants in the docklands developer.

Mr Reichmann sold his direct stake in Canary Wharf earlier this year, but he still owns warrants to subscribe to 43 million shares granted to him at the time of the stock market listing in 1999.

The warrants have a strike price of 375p and 275p and expire in December 2005 and spring of 2006. It is thought that the offer is less than £10 million following an independent valuation — below the £16 million that Morgan Stanley offered Mr Reichmann at the time of the takeover earlier this year.

Morgan Stanley and Canary Wharf refused to comment.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive