JP Morgan is to offload more than 250,000 sq ft at London’s Canary Wharf as it attempts to consolidate its UK property holdings ahead of its purchase of stricken US bank Bear Stearns.

The US investment bank has instructed Knight Frank to assign or sublease nearly 260,000 sq ft at 5 Churchill Place that was to be occupied by Bear Stearns before its sudden meltdown in March, which prompted the biggest rescue of a bank since the Great Depression.

JP Morgan is thought to be offering a 20-year term with no breaks and five-year open-market rent reviews. The building is due to be completed by July 2009 and the total rent on the space is £10.5m a year.

It has been rumoured that JP Morgan, which is in talks with the City of London corporation and Hammerson to create a 1m sq ft campus near the Barbican, would not occupy the space.

However, its decision to assign will prompt further speculation that big banks, which have been battered during the credit crunch and whose shares this week slumped to a three-year low, will begin to rationalise their property portfolios to save costs. 

Canary Wharf could be particularly punished. Although its current vacancy rate is only 2%, and most of its tenants are locked into long leases, it is heavily focused on financial occupiers. Songbird, the AIM-listed company whose only asset is a majority stake in Canary Wharf, has experienced a 65% fall in share price to 91p in the last year through a perceived exposure to the property and financial crises.

It also emerged this week that US bank Lehman Brothers has appointed Knight Frank and Cushman & Wakefield to sublet up to 120,000 sq ft on short-term leases at its 25 Bank Street tower and some space in its South Quay 3 building in Docklands. However, it is space that Lehman had already sublet to occupiers, such as the Financial Services Authority, and whose leases are close to expiry or have already expired.

Barclays is still trying to sublet around 30,000 sq ft at the estate and it is thought that Barclays Capital could also be planning to sublet space.

This week another Docklands powerhouse, Citi, appointed CB Richard Ellis, Cushman and Knight Frank as its preferred real estate partners to advise on its plans for property, which will include rationalising and ‘improving economies of scale’ across its 13.2m sq ft Europe, Middle East and Africa portfolio.

Citi is already rationalising its estate as part of an ongoing review. Knight Frank and Cushman are subletting around 150,000 sq ft at its 42-storey 25 Canada Square tower at Canary Wharf, where Transport for London’s Crossrail team is under offer to take 116,074 sq ft on a 10-year lease.

All parties declined to comment.