Songbird Estates, which develops and leases most of Canary Wharf in East London, said yesterday that the value of its property portfolio fell by 9.6 per cent to £6.7 billion in the first half of the year.

Its losses totalled £469.9 million after suffering from the financial crisis affecting many of Canary Wharf Group’s tenants, including Lehman Brothers, the American investment bank that went into administration last week.

Even so, John Garwood, company secretary of Songbird, said that its rent from Lehman, which contributed 14 per cent of the landlord’s revenues, was guaranteed for a further four years through an arrangement with AIG, the American insurance giant that had to be bailed out by the US Federal Reserve last week.

Mr Garwood was also optimistic about the possibility of Nomura, the Japanese bank that has bought Lehman’s European investment banking business, taking on some of Lehman’s office space.

Other major investment banks with offices in the Wharf include Credit Suisse, Barclays, Morgan Stanley and Citigroup.

Net assets per share at Songbird tumbled by 30.7 per cent to 149p in the latest sign that London office rents and commercial property values are being hit by the credit crunch.

Mr Garwood said that Songbird was relatively resilient to the credit crisis as it did not develop buildings speculatively. Its portfolio is 99.7 per cent let, with an average unexpired lease term of 18.4 years. He added that it was too soon to predict how much the crisis would affect the company. Songbird is also vulnerable to a retail downturn as it leases much of Canary Wharf’s shopping space and has a further 40,000 sq ft under development.

Mr Garwood said that there was still demand for the space from retailers and he was confident it would be let.

Songbird management said that average prime rents dropped by about £2 per sq ft to £45 per sq ft in the first six months of 2008. This compares with a peak of £50 per sq ft in the third quarter of 2007, according to Knight Frank.

Investors are worried about Songbird’s private equity-style highly leveraged balance sheet, with net assets of £1.9 billion, but net debt of £3.9 billion. However, it can take into account the £870 million cash in Canary Wharf’s balance sheet to net against outstanding debt. Analysts at KBC Peel Hunt believe that this makes it “highly unlikely” that it will breach its lending covenants.

Songbird’s shares fell by 5.1 per cent yesterday to 93p — down from 230p at the same time last year.

It emerged that Metrovacesa, the Spanish property company, is having problems selling all or part of the HSBC tower in Canary Wharf. It bought the skyscraper from HSBC in April 2007 for £1.1 billion, making it Britain’s most expensive building. Metrovacesa is selling the building to help to repay an £810 million bridging loan that expires at the end of November.

Other parts of the London office market are suffering too, with falls of 4.3 per cent in London’s West End, and 1.6 per cent in the City in the second quarter of 2008, according to Jones Lang LaSalle. Research from Cluttons yesterday showed that prime West End office rents fell from an average £125 per sq ft in April to £110 in September.

Towering ambition

— Canary Wharf contains the UK’s three tallest buildings: One Canada Square (774ft), 8 Canada Square and the Citigroup Centre (both 654ft)

— G. Ware Travelstead, an American property developer, proposed a new financial district in the Docklands in 1985. He was unable to fund the scheme and it was taken over by Olympia & York, which filed for bankruptcy in May 1992

— In 1995 a consortium backed by the former owners of Olympia & York bought the development and renamed it Canary Wharf Limited

— About 100,000 people work at Canary Wharf

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