London property developers are sacrificing height and glitz for better returns as the craze for building iconic skyscrapers comes to an end, said Ken Shuttleworth, the architect of the landmark Gherkin building.
“The age of bling is over,” said Shuttleworth, who led the team at Norman Foster’s firm that designed the seven-year- old tower in the City of London financial district. He said it would never get off the ground today. “Money now drives everything, so if you can build something for half the price, you will,” he said.
While skyscrapers with nicknames such as the Shard, the Cheesegrater and the Walkie Talkie are joining the 40-story Gherkin as part of the British capital’s skyline, those buildings reflect past rather than present considerations. All of the office towers that are due to open in London by 2014 were conceived before the financial crisis and developers are increasingly adopting cheaper, less ambitious plans.
Commercial Estates Group Ltd., a privately held developer, last month said it will review a plan to build a 63-story property adjacent to Canary Wharf. Hammerson Plc (HMSO), a real estate investment trust that owns seven London office buildings, in January abandoned its design for a 32-story tower and block in the City in favor of a 15-floor office complex.
“A tall building was proving very expensive, so we went back to the drawing board,” Martin Jepson, Hammerson’s managing director for London, said by telephone.
New York Revival
Developers in New York are reviving projects to capture rising rents and office construction is set to rebound after the credit crisis curbed building. One World Trade Center, which will be the western hemisphere’s tallest tower when it opens in 2013, is one of several skyscrapers that may be built by the end of the decade, according to New York-based property broker Cassidy Turley.
In London, high-rise buildings cost 50 pounds to 150 pounds more per square foot than shorter ones because of their stronger frames and typically more irregular shapes, said Steve Watts, the partner responsible for tall structures at real-estate adviser Davis Langdon, part of Aecom Technology Corp. (ACM)
That means the money needed to construct a skyscraper with 500,000 square feet (46,000 square meters) of space can be 150 million pounds, twice as much as a lower-rise structure with the same space.
What’s more, many tenants won’t pay the typical 15 percent to 20 percent extra rent for being in a tower, given the economy’s weakness, said Mark Swetman, project director for Hines Interests LP. Texas-based Hines is developing the 389,000 square foot, eight-story Cannon Place project in central London.
Tall buildings are also less attractive to investors than shorter ones because tenants can’t start moving in until the construction work is over, said Mark Farmer, a partner at London-based property adviser EC Harris LLP. That’s not the case for a development divided into two or three low-rise buildings.
“You can’t occupy floors below a building site, so it takes a very long time to get the first money through the door,” he said.
The move away from office towers is a “flight from vanity to sanity,” Farmer said. “Bankers are all over the viability of high-rise like a rash and are indirectly shaping London’s skyline, not architects,” he said.
In the meantime, Stuart Lipton of Chelsfield Partners LLP is trying to find cheaper ways of putting up skyscrapers. Lipton, who built most of Broadgate in London between 1984 and 1991, plans to import techniques from the U.S. to make tall buildings more profitable.
Last year, Lipton, 68, asked Watts at Aecom to design a prototype 40-story tower costing close to 125 pounds per square foot to erect, about half of the average cost. Watts said he cut the cost to between 135 and 150 pounds by “keeping everything as simple and repetitive as possible.”
“This is a new opportunity rather than the death of high rise,” Lipton said by telephone. “The latest towers are wibbly-wobbly fancies of the sky, but with a more disciplined approach to architecture and standardized components, you can get elegant and efficient designs for much less money.”
The Gherkin reflected a booming economy and the aspirations of Ken Livingstone, the London mayor from 2000 to 2008 who championed futuristic office buildings with colorful names.
Miles of Steel
More than 22 miles (35 kilometers) of steel was used to build the Gherkin, located at 30 St. Mary Axe. The 180-meter (591-foot) tower’s exterior is made up of 24,000 square meters of glass, enough to cover five soccer fields, according to its website. The only piece of curved glass is the dome at the top.
Shuttleworth’s design for a new 700,000 square-foot building at the Broadgate complex, near Liverpool Street Station, has 13 stories and little more than a third of the outside walls will be glazed to cut energy costs. The property, approved by city planners yesterday, will be occupied by UBS AG (UBSN), the Swiss bank that’s already Broadgate’s biggest tenant.
Tenants are demanding “austere and efficient” buildings that are more likely to be “ground-scrapers” than high-rises, said Shuttleworth, 58. “The tall glass box is dead.”
In December, Bloomberg LP announced a plan to have a property constructed on a site close to the Bank of England that will be the company’s European headquarters. The building will be designed with Foster + Partners, the firm Shuttleworth worked for when he did the Gherkin. Bloomberg is the parent of Bloomberg News.
Demand for office space in the City of London evaporated in 2008, as Britain entered its worst recession since World War II and the government was forced to bail out Royal Bank of Scotland Group Plc. Vacancy levels have since fallen and a shortage of space is causing rents to outpace Canary Wharf, the city’s second, smaller financial district.
By January of this year, the market had recovered enough to enable Land Securities Group Plc (LAND) to revive the Walkie Talkie near the Bank of England and British Land Co. to start work on the Leadenhall Building high-rise known as the Cheesegrater.
The Shard, architect Renzo Piano’s 1,016-foot pyramid next to London Bridge, will have more than twice as much glass as the Gherkin and will be Britain’s tallest tower when it’s completed next year. It’s being funded by Qatar-based companies.
The developers aim to capitalize on a shortage of prime office space that, according Capita Symonds Ltd., caused rents in the City to increase by 16 percent in the past 12 months. Within two years, tenants may be charged about 65 pounds a square foot, up from 55 pounds now, the London-based property broker said in an April 1 report.
Financial-services companies in the capital will add 11,000 employees in the next three years and will require the equivalent of four Shards to accommodate them, BNP Paribas SA’s real estate unit said in an April 15 report.
“Towers aren’t built because people want to move into them, but because developers want to maximize their return on a piece of land,” EC Harris’s Farmer said. “There will always be that gravitational pull upwards.”
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