London's office space shortage sparks interest in older buildings

[LONDON] Modern office towers with nicknames like the Walkie Talkie and the Cheesegrater are being completed high above the City of London, giving the impression there's plenty of room for a resurgent financial industry. Closer to the ground, developers are preparing for a shortage of space.

Investors including Blackstone Group LP, the world's biggest buyout firm, Brookfield Office Properties Inc and Land Securities Group Plc, the UK's largest real estate investment trust, are looking for well-worn office buildings from the 1980s and early 1990s to buy and refurbish, as rising demand and a shortage of prime space in the City lift prices and rents.

"If the bricks and bones of buildings are of sufficient quality, we reposition the product and benefit from the supply and demand story," James Lock, a managing director at Blackstone's real estate unit, said.