* JPMorgan pays 237 million pounds for Canary Wharf site
* Relocation a blow for historic City of London
* Nomura unsure about future at Canary Wharf
(Adds Nomura comment)
By Sinead Cruise
LONDON, Nov 17 (Reuters) - Banking heavyweight JPMorgan will relocate its European headquarters to London's Canary Wharf from the City of London, boosting morale for the company which owns Britain's second-largest business district.
Canary Wharf Group (CWG) is competing more than ever with the city to host major bank headquarters at a time when many companies are shedding staff and looking to make savings.
JPMorgan has paid CWG 237 million pounds ($350.9 million) for a plot of land on the estate, CWG's majority owner Songbird Estates said.
On Monday, John Garwood CWG company secretary told Reuters: "It is a pretty significant commitment on the part of JPMorgan, both to London and to Canary Wharf."
The confirmation of JPMorgan's move to a site close to the Credit Suisse and Morgan Stanley offices comes after weeks of gloom in the financial and property sectors and on the same day the Confederation of British Industry predicted there could be nearly 3 million people out of work by 2010.
JPMorgan, which has invested billions of dollars to save stricken banks Bear Stearns and Washington Mutual, has appointed CWG to develop the building, which could provide up to 1.9 million square feet of space and will enable the bank to consolidate offices across London.
CWG will wait for instruction from JPMorgan before beginning construction, even though it has already begun infrastructure works. JPMorgan will forfeit 76 million pounds if it later chooses not to proceed with construction.
"It is an example of a client working with a developer to ... make sure that the building can match as closely as possible the needs of the client in what has become a very changeable environment," Garwood said.
JPMorgan remains under contract to pay around 8.3 million pounds in annual rent on behalf of Bear Stearns, which agreed to occupy 206,000 square feet of office space on a 20-year lease in another building due to complete next summer.
SILVER LINING
Confirmation of the deal provides a welcome boost for the Canary Wharf business district after September, when Lehman Brothers Holdings Inc filing for bankruptcy protection and the Bank of America's purchase of Merrill Lynch, raised doubts over occupancy.
The district -- home to Citigroup, Bank of America, HSBC and Barclays -- remains almost fully let partly due to rents being on average 20 percent cheaper than in the City.
According to results published in September CWG's portfolio was 99.7 percent let as of June 30.
Market commentators pointed out that Canary Wharf's JPMorgan win was another loss for Britain's historic financial heartland, which has lost a slew of key financial sector occupiers to the Wharf in the past decade.
"In the long-term, rents in Canary are a bit lower, but the main issue is deliverability," said Dan Bayley, head of UK office agency at broker Atisreal. "Once you are over 500,000 square feet in the City, there are far more planning hurdles to delivering a big building."
Canary Wharf may have lured JPMorgan away from the City but prising Nomura away from the Square Mile may be a tougher challenge.
The long-term London City resident has set up operations at 10 Bank Street, Canary Wharf, in the former Lehman Brothers headquarters after taking over its investment banking division last month. However a Nomura spokeswoman said it was unclear whether they would remain in the property on a long-term basis.
She also told Reuters the bank was unlikely to vacate the offices it owns in the City of London.
Garwood said he hasn't received any formal indication of Nomura's long-term plans. "They have paid rent up until the end of the year and as far as we are concerned that will just carry on," he said. (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)
(Editing by Sharon Lindores)