The Qatar funded London Shard will face a struggle to attract tenants, real estate experts have warned, as Europe’s tallest building opened on Thursday with 26 of its 87 floors still vacant.
According to property consultant, CBRE, rents for the best offices in London’s financial district have remained stuck at $85.80 per square foot since September 2010, the longest period of flat rents since records began in 1960, a Reuters report has said.
“The only reason rents haven’t started to fall is the relatively low level of available space at the moment,” Kevin McCauley, head of central London research at CBRE, said. He added that he expected rents to remain flat for the rest of the year.
Privately funded by the Qatari Royal Family, the Shard is one of several skyscrapers that are being built across London. However, since the advent of the financial crisis, lettings for these properties have remained muted.
Developers have remained optimistic, despite the difficulties, pointing out that a wave of lease breaks and expirations over the next few years will see tenants moving into new offices in favourable locations.
Despite the reservations, the Qatari funders of the project have said that they are willing to take a patient approach to recouping their investment.
“Recovering our investment is a minor thing at the moment,” said Sheikh Abdullah Bin Saoud Al Thani, governor of Qatar Central Bank.
“We have confidence in the London market and a long relationship with the city,” he added, emphasising that a slowdown was part of a normal economic cycle.
The development of the Shard, a neighbouring office building called The Palace and communal areas around London Bridge Train station equate to around $2.4bn in investment.
At present, the only tenant in the 87 storey tower is the 195 room Shangri-La hotel, which occupies levels 34 to 52 of the building.
However, the building’s developers remain convinced that the building will be fully occupied by 2014, though they conceded that the long term view was only sustainable because of the backing of the Qatari investors.