Europe's Tallest Tower Empty Despite Lofty Ambitions

Monday, 3 Jun 2013 | 1:54 AM ET
Peter Phipp | Photolibrary | Getty Images

As western Europe's tallest building, The Shard, gets ready to celebrate its first birthday, skepticism about its popularity mounts amid revelations that only six of its 72 floors are in use.

A spokesperson for the owner of the 310m high (1,016 feet) tower, Sellar Property Group, confirmed to CNBC that it remained mostly dormant, despite its high-profile opening ceremony at the start of July 2012.

The Shard, which was designed by Italian architect Renzo Piano, has been described as more of a vertical town than a building. The Qatari sovereign wealth fund backed the 2 billion pound ($3 billion) development on the south bank of the River Thames, opposite London's financial district the City of London.

(Read More: Roundabout Way: London's Tech City Sets Sights High)

But only a five-floor viewing level and a restaurant, on one floor, are currently in use. For confidentiality reasons, the building's owner was unable to comment on any forthcoming residents of either the luxury flats or the 600,000 square foot of office space that currently lies empty.

The leader of the local authority which is home to The Shard, Southwark Council, said he was not concerned about the building's popularity.

"We're confident that the Shard will succeed in filling all its office space, and I understand it is actually ahead of schedule. I haven't seen any evidence that companies are reluctant to move there," Peter John told CNBC.

Two more restaurants are set to open in the skyscraper this year, along with a 19-floor hotel which is expected to open in the Autumn.

(Read More: London Property No Longer Looks So Safe)

When compared to other iconic office buildings in the U.K.'s capital, The Shard may be able to shake off any "white elephant" tag. Centre Point in London's West End, for example, has never fully been let since it was built in the 1960s, and has been 40-60 percent vacant for the majority of the time it has been open.

Richard Sayer, senior commercial property consultant at estate agent Kinleigh Folkard & Hayward, told CNBC there could be an explanation for why tenants have yet to move into The Shard's office space.

"For a lot of businesses The Shard's location is in the wrong place with many office occupiers preferring to head towards the City. Whilst the Shard suffers, comparable schemes in the City such as The Cheese Grater and The Walkie Talkie have performed extremely well where letting office space is concerned," he said.

"Another reason could be that the rents are too high. In 2006 the Shard agreed a pre-let to Transport for London who reportedly signed up for 190,000 square feet at a rent of 40 pounds ($60) per square foot. The developer subsequently pulled out of the deal, however, thinking that they would be able to achieve rents at nearby City [of London] levels of between 55 pounds and 60 pounds per square foot."

(Read More: UK Property Price Rises Stoke Fears of New Bubble)

Blimey: The View from London's Tallest Building
The Shard opens to the public on February 1. CNBC got a sneak preview of London from 44 floors up on the Shard's viewing platform.

The owner of The Shard said it could not comment on whether asking prices for office rental rates had increased or decreased over its lifespan for confidentiality reasons.

Sayer added that the building's owner appears to have deep financial pockets and so will likely be able to weather the current storm, but warned that an Empty Rates Bill - which taxes office space even if it is empty - could mean that dark clouds are on the horizon.

By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81.


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