Under an agreement with rival bidder Brascan, Reichmann had until the end of January to come up with a bid. In the event that he failed, Reichmann pledged to throw his weight behind Brascan's own attempt to counter Morgan Stanley's offer for the company. Brascan now has 10 working days to put an offer on the table.

At issue is the current value of the 14 million-sf Docklands office complex, and the prospects for a recovery in the market. With vacancy rates in the City of London office market running at record high, financial services operators have a wide choice of possible office buildings. Although agents report an upturn in enquiries in the City, the glut of space is likely to put rents at Canary Wharf under pressure in the short and medium term. It is for this reason that Morgan Stanley only felt able to offer £1.5 billion ($2.7 billion) for the company.

Even though Brascan holds 9% of Canary Wharf--and can count on Reichmann's 8.8%--the fact that Reichmann failed to convince investors that he could extract more value from a business that he knows better than anyone else is causing some skepticism in the market that it can trump Morgan Stanley's offer. Canary Wharf shares fell 4p to 263p on news of Reichmann's withdrawal.