Shard reaches for the sky amid office sector gloom
By David Fickling
Published: March 16 2009 02:00
Construction of western Europe's tallest building will begin in London today amid the gloomiest market for commercial building in decades, thanks to backing from a group of Qatari banks.
Designed by Renzo Piano, the Shard of Glass will tower 1,016ft above London Bridge station and stand nearly three times as high as St Paul's Cathedral.
The developers hope to avoid comparisons with One Canada Square, which it will overtake as the UK's tallest building when it is completed in 2012. The 800ft centrepiece of Canary Wharf was finished in the depths of the last recession in 1991 but remained part-occupied for most of the 1990s, leading to the collapse of its Canadian developer Olympia & York.
"This will be a landmark building and we've already let out 40 per cent of it," said Bernard Ainsworth, project managing director.
New orders in the non-residential building sector in the three months to the end of January came to just £2bn, compared with £4.1bn in the same period last year, according to recent data from the Office of National Statistics.
By comparison, the development cost of London Bridge Quarter alone is priced at £2bn, with £650m in contracts put out to tender so far.
"This is one of the few shows left in town now," said Chris Cole, chief executive of WSP, the structural engineer on the project.
Financial backing will be provided by a consortium of four Qatari banks - QInvest, Qatar National Bank, Qatari Islamic Bank and Barwa - as well as UK-based property developers Sellar. They came in after European lenders, including Credit Suisse and Hypo Real Estate, withdrew following the onset of the credit crunch in 2007. Hypo was bailed out by Germany's central bank last October.
Construction companies have been focusing on work for the public sector and regulated utilities, with hopes attached to projects such as the Olympics site, Crossrail and the widening of the M25.
But Derek Tordoff, director-general of the British Constructional Steelwork Association, said any stimulus from public projects would be blunted by their comparatively small scale next to the massive but ailing commercial sector.
"Everyone thinks the Olympics is the saviour of the construction industry but there will be more steel going into [the Shard] this year than into the entire Olympics site," he said.
One major public sector client has already bought into the Shard project: Transport for London will lease about 20 per cent of the total floor space, while a Shangri-La hotel will take up another 20 per cent. But the remaining 60 per cent is unlet.
Fears about the outlook for the office rental market meant that most new office projects were being called off, said Bill Page of Jones Lang Lasalle. That gave some hope of a supply-led recovery, although rents fell at double-digit rates last year and, he added, would continue to do so this year and next, before levelling off in 2011 and only starting to rise again in 2012.
"Most people just don't want to develop into this market," he said.