Does anyone want to move into the Shard?
Although it is due to be completed next month, the 1,017ft London tower's office space is still empty – but its developers refuse to panic, reports Laura Chesters
Tuesday 29 May 2012
Not since the Gherkin has a London skyscraper so quickly captured the British public's imagination as Renzo Piano's Shard at London Bridge, but despite its fame its ability to attract tenants at the shiny new 1,017-foot tower has been distinctly lacking.
Over the river, veteran developer Gerald Ronson's Heron Tower, close to Liverpool Street Station, quickly attracted tenants and is now 30 per cent let.
Some City developers planning skyscrapers are holding back from construction until they secure a pre-let – the guarantee of an occupier signing a lease – before they commit to building their giant towers.
But the Shard's developer, Irvine Sellar, dug a shovel in the ground ahead of any office tenants signing up, and with the tower set to complete in June its offices are still empty.
The City's chief planner, Peter Rees, explained the two schools of thought when it comes skyscrapers.
He said: "Traditionally, developers would not push the button on a development until they had around a third pre-let. But I think now occupiers are more short term and starting to build a property ahead of the first pre-let can pay off."
The Shard's 575,000 square feet of office space is officially unlet, with just 22,000 square feet rumoured to be close to signing, and the financial viability of the scheme looks questionable.
More cautious developers, Great Portland Estates with Canadian developer Brookfield, are waiting for pre-lets before they begin work at their tower at 100 Bishopsgate in the City. But Mr Sellar and his Qatari backers are not alone in taking the risk, although others have arguably had more success.
Land Securities has begun work on its 38-storey tower known as the "Walkie Talkie" – at 20 Fenchurch Street near Fenchurch Street Station. Land Securities, which teamed up with Canary Wharf Group to fund the scheme, is close to signing up nearly 8 per cent of the offices and is aiming to have 200,000 sq ft let by the end of its financial year.
British Land and partner Oxford Properties started work on the 224-metre high Leadenhall Building – known as the "Cheesegrater" – without a pre-let. The tower on Leadenhall Street in the City is now a third let after Aon signed up for 191,000 sq ft.
The Shard has been through an epic development process from an idea in the Mr Sellar's mind in 1999 when he first started working on plans, to the creation towering above nearly every London view today.
What some might not know is that it did once have a pre-let. Back in 2006, Transport for London (TfL) signed up for 190,000 sq ft, agreeing to pay around £40 per square foot for the tower south of the river, at London Bridge station.
But by 2010, Mr Sellar and his team decided it could achieve a better rent and a better class of tenant and parted company with TfL.
The scheme is not just offices – the tower will also be home to a restaurant,
a Shangri-La hotel as well 12 floors of luxury apartments.
A spokesman for the Shard London Bridge, said: "Our Qatari investors can take a long-term view. The priority is about the right tenant. We want a good mix of tenants whether it be media, technology or legal or hedge funds occupiers. But we will not rush the lettings for the sake of signing deals. We don't need to and don't want to."
Mr Sellar and the Qataris choosiness may pay off in the end. City sources say the Shard is already attracting interest from traditional, West End of London occupiers rather than City financial firms.
If it can sign up tenants during the next year or so at around £55 or £60 per square foot it stands to be more than £3m better off than if it had stuck with TfL.
James Beckham, a City expert at property advisor Jones Lang LaSalle, said: "Whilst tenant demand remains muted due to the uncertainties surrounding the eurozone, the supply side remains tight which should keep rents firm. Pre-let rents for the higher tower floors in City offices in particular will be up in the £60s."
Since Big Bang in the City in 1986, taller and more elaborate towers have been on the agenda. Skyscrapers were designed to show the wealth and prowess of the Square Mile. But now funding for these schemes and the demand for them has waned, the latest clutch may be the last for a long time.
The Shard might be one of the last of its kind but Mr Sellar and the Qataris are banking on it being worth the wait.
Office space let
The Cheesegrater: 33%
Heron Tower: 30%
Walkie Talkie: 8%
Pinnacle: on hold
100 Bishopsgate: on hold
The Shard: 0%
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