Canary Wharf Group is pushing forward with expansion plans, in spite of the impact of the credit crunch on investment banks, the group’s main source of tenants.

The group is confident that it will secure JPMorgan Chase as a key tenant for a new phase of the Docklands financial district by the end of the year, George Iacobescu, its chief executive, said.

JPMorgan is in exclusive negotiations to take three new offices on the Thames riverside at Canary Wharf, having shunned a Hammerson development in the City of London. A question mark has hovered over the American bank’s commitment to take the 1.9 million sq ft of new space and JPMorgan could still walk away without paying any penalty.

However, it has emerged as one of the strongest banks in the present financial turmoil. “We are talking to them all the time and I believe they will sign by the end of the year,” Mr Iacobescu said.

Four buildings - a total of 1.3 million sq ft of space - are due to be completed next year. Most of these have been prelet or presold to future occupiers, which include KPMG, the accountants, Fitch, the rating agency and its parent Fimalac and State St, the American bank. Bear Stearns was to take the fourth building.

Canary Wharf also expects to get the green light from Tower Hamlets council this week for a joint venture to develop a seven million sq ft phase of the estate, known as Wood Wharf, over the next ten to fifteen years. If approved, Wood Wharf - a joint venture between British Waterways, Ballymore Properties and the group - would pay £50 million towards local amenities. The shareholders would also contribute £100 million towards a new Crossrail station for the area.

Canary Wharf suffered its first significant setback linked to the credit crunch last month when Lehman Brothers, one of its biggest tenants, collapsed. Lehman’s rent was covered by AIG, the insurer, which will pay the lease for four years after a default. It is still unclear whether Nomura, which has taken on about 1,600 of Lehman’s UK staff, will keep the staff in the Canary Wharf office. However, the property owner is confident that - if necessary - it can sublet the space as vacancy rates on the entire Canary Wharf estate are running at 2.3 per cent, much lower than in the City or the West End.

Songbird, which owns 60 per cent of Canary Wharf, said last week that the value of its property had fallen by almost 10 per cent to £6.7 billion in the first six months of the year. Further writedowns are expected in March, when the next half-yearly revaluation is done. The next set of writedowns will bring the company within touching distance of its 87.5 per cent debt to Net Asset Value covenant. The ratio is currently at 78.3 per cent.

The Docklands development has survived tough times before, collapsing into administration in 1992. It was rescued in a £1.1 billion package in 1993 and made its first full-year profit in 2000.

In March 2004, the group was taken over by a consortium of investors led by Morgan Stanley, using a vehicle named Songbird Estates.

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