London's Shard tower opens with empty floors, flat rents

Thu Jul 5, 2012 4:41am EDT
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By Tom Bill

LONDON (Reuters) - Superstar architect Renzo Piano calls the European Union's new tallest building a "vertical city", but when his stunning Shard tower opens on Thursday over London Bridge it will house the equivalent of a whole vacant neighborhood.

The elongated glass pyramid, built atop a train station in a scruffy neighborhood near the Thames, will open with 26 floors of vacant office space, and developers have to fill it at a time when rents are at the flattest in at least 50 years.

The Shard's developers are spared from market wrath solely because the building was built with funding by the deep-pocketed royal family of Qatar, rather than a publicly listed firm, said John Cahill, a property analyst at Investec.

"With the Shard's office floors still empty, it would be panic stations if it was a listed developer behind it," he said.

Long gone are the days in London's commercial real estate market when the Foster + Partners-designed 30 St Mary Axe, known as "the Gherkin" because of its oblong shape, opened in the financial district in April 2004 with all floors already let.

The Shard is just one of several skyscrapers now sprouting across London with nicknames that reflect the silhouettes they cast on the skyline. But with a financial crisis having blown in since architects first came up with designs for the "Walkie Talkie" and the "Cheese Grater", lettings have been muted.

Rents for the best offices in London's financial district - the yardstick used by Shard developer Irvine Sellar for the offices at the bottom of the tower - have been 55 pounds per square foot since September 2010, property consultant CBRE said. That is the longest period of flat rents since its records began in 1960.

"The only reason rents haven't started to fall is the relatively low level of available space at the moment," said Kevin McCauley, head of central London research at CBRE, who expects rents to remain flat for the rest of the year.   Continued...

The Shard is seen in an undated image handed out by the public relations company working for the Shard, in London July 4, 2012. REUTERS/Handout/Newscast/