London’s Office Boom Revives Talk of Building Tallest Skyscraper

April 9, 2014

A plan to build a skyscraper near Liverpool Street railway station, slated to be the tallest in the City of London, may be revived this year as rising occupancy rates in the financial district draws investors, according to Peter Rees, the City’s former planning officer.

Work on the Pinnacle, an office tower designed to have a height of about 288 meters (945 feet), was halted in 2012 after the economic crisis roiled financial markets.

“There is a will to go forward, there is a demand for the space and there’s no difficulty at all in finding funding to build the project,” Rees said in a March 21 interview ahead of his retirement last week.

The U.K.’s improving economy encouraged companies to lease 7 million square feet of office space in the City of London in 2013, the most in 13 years. The Cheesegrater and the Walkie Talkie, skyscrapers in the district that have been under construction since 2010, have mainly attracted insurers as tenants.

The City of London’s success at winning tenants for new buildings, even as banks based in the area struggle to repair their balance sheets, underlines the district’s ability to overcome setbacks including the 2008 banking crash, Rees said.

“Each time the City seems to bounce back stronger than ever,” he said.

Big Bang

Rees was hired by the City in 1985, when it was preparing to become a banking hub. He was charged with overseeing the process of reshaping the area at the time when many of its office buildings were unsuitable for businesses with a financial services focus.

The Big Bang in 1986, which deregulated financial services and allowed overseas banks to open in the U.K., transformed the district as banks developed 10-story buildings known as groundscrapers to accommodate their trading floors, Rees said.

Under his watch, more than 75 percent of the office space in the City of London was redeveloped or refurbished, the borough said in a March 7 statement. Financial services now accounts for more than 22 percent of total income in London, according to the borough’s website.

“That wasn’t a terribly healthy thing, to be under the control of one particular sector,” Rees said. “It’s getting back into a better equilibrium.

Tech Tenants

Banks accounted for 1 percent of the new space that was leased in the district last year, down from 10 percent in 2006, broker Savills Plc said in a March 25 report. Technology and creative firms agreed to rent 27 percent of the space, up from 8 percent in 2006. Insurers fell from 28 percent of newly leased space to 24 percent during the same period.

Rees, who is now Professor of Places and City Planning at University College London, also oversaw the planning for the cluster of towers at the eastern fringe of the district. The first, a skyscraper nicknamed the Gherkin that was conceived by Foster + Partners, opened in 2004.

“The Gherkin wasn’t designed to be an icon,” Rees said. “It was shaped by practical constraints like the micro-climate, the need for natural ventilation, the need to diminish its impact on the skyline, the need to produce the maximum amount of space around the base of the building.”

CBRE Group Inc. is trying to sell the Pinnacle on behalf of the development’s owners for about 220 million pounds ($369 million), according to the broker. The owners include Arab Investments Ltd. Ian Lindsley, an Arab Investments spokesman at Jefferson Communications, declined to comment. The tower was designed to have 1 million square feet (92,900 square meters) of space.

Not all of the tall buildings met with his approval. Barclays Plc’s former headquarters on Lombard Street is an example of a project that’s “ugly” and unsuitable for its location, he said. “They got permission, they built the building and then they moved to Canary Wharf,” he said. “I feel slightly vindicated, but we’re stuck with the building.”

The building, known as 20 Gracechurch Street since its lower floors were redeveloped, currently has tenants including Bermuda-based Catlin Insurance Co. Ltd., according to the insurer’s website.

Construction Noise

The City of London has resisted the construction of homes in the district amid concern that homeowners will object to future developments, Rees said. Apartment towers won’t even be considered there, he said, because residents don’t want to be disturbed by construction noise or kept awake at night by people enjoying themselves.

When Rees started work at the borough, finance workers in the district regularly went to the pub at lunchtime, seeking gossip from which they could profit.

“The problem was that in doing so, they consumed a considerable amount of alcohol and forgot most of the gossip before they got back to the office — if they did get back to the office,” he said.

Overseas banks that moved into the City preferred their workers to stay in the office, and Rees tried to balance the two. He decided that pubs and nightclubs were more suitable than homes for the area, because they wouldn’t conflict with business use during the day.

People “in their 20s and 30s are coming to London from all over the world because London’s a wonderful party, just like New York,” he said. “People get the job to pay for the party, not the other way around.”

–With assistance from Patrick Gower in London.

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