When the plans were unveiled to build a 73-storey office tower called 1 Undershaft in London nearly a year ago, the British district known as the Square Mile was still an undisputed centre of world finance.
That was before Brexit.
Today, nevertheless, plans are going ahead for this tower, to be tucked between other distinctive modern London office buildings known as the Cheesegrater and the Gherkin. At 306.9 metres, the proposed building is two-thirds the height of the CN Tower in Toronto.
“The project is still proceeding,” says Luke Pollard, director of Field Consulting, the London company handling publicity and inquiries for the proposed tower.
“We continue discussions with the City of London [the planning authority for 1 Undershaft]. Despite the changes in the economic environment, 1 Undershaft’s planning process is proceeding well,” he says.
Everything is so far in place to begin construction by the end of December on the building, whose height is the maximum allowed in London, Mr. Pollard says.
Even by the swaggering standards for commercial property that developers set in London before the somewhat surprising Brexit referendum result, the plans for 1 Undershaft are ambitious.
The developer, Singapore-based Aroland Holdings Ltd., has proposed a building with 90,000 square metres of office space and 1,800 square metres of retail space in the public square in front of the building. The land alone was acquired in 2011 for a reported £288-million, or about $500-million Canadian at current exchange rates.
London’s once-staid financial district has undergone a transformation in the 21st century, with flamboyant buildings sporting colourful nicknames that reflect their appearances. In addition to the Cheesegrater and the Gherkin, which actually do look like they came from a giant’s kitchen, there is also the Shard, jutting sharply into the skyline.
The design for 1 Undershaft, by architect Eric Parry, is more sedate than its eccentric neighbours, a rectangular tower crisscrossed by supporting beams that might look more in place in a skyscraper-dotted city like New York or Toronto than in London.
In early June, a few weeks before the Brexit vote, Aroland signed an agreement with the Museum of London to have the museum manage 1 Undershaft’s proposed public viewing gallery on the 71st and 72nd floors.
It would be the highest public viewing gallery in London. “There could be no better place to observe how the fabric of London has changed over two millennia while thinking about what this means for the city of today and tomorrow,” said Sharon Ament, the Museum of London’s director.
The developer appears unruffled by the apparent sea change that has taken place in London’s prospects as a financial centre since Britain voted on June 23 for Brexit, their proposed exit from the 28-member European Union.
London hosts 40 per cent of the European headquarters for the world’s top companies. But after the Brexit vote, many companies, both large and small, have shown interest in either relocating or setting up new satellite offices in places such as Frankfurt, Paris or Dublin – all in countries planning to remain in the EU.
Nevertheless, 1 Undershaft’s backers may prove to be right. The Confederation of British Industry (CBI) and commercial property adviser CBRE surveyed 186 companies during the summer, after the June 23 referendum. More than two-fifths (41 per cent) of the companies surveyed said that they intended to maintain their investment plans, with one in 10 (9 per cent) intending to increase their plans.
Only 16 per cent said they would freeze investment plans now that British voters have spoken, while 21 per cent think they will reduce them.
“London remains firmly open for business, and the capital’s firms are well used to navigating choppy waters,” said Lucy Haynes, CBI’s London director.
“Many appear to have taken the decision to leave the European Union within their stride. Many firms are still considering their response to the referendum, and in an increasingly competitive global race, they will be looking for a clear plan from the [British] government and [London] City Hall to maintain the openness of London’s economy.”
Robert Maguire, a London property consultant who has overseen projects in London’s East End as well as Manchester, Liverpool, Cardiff and overseas, says that despite the apparent post-Brexit confidence, there are some signs of concern.
“Many commercial developers are carefully reviewing their pipeline and will be reluctant to commence new office buildings on a speculative basis without a significant pre-let,” says Mr. Maguire, who worked early in his career at Toronto’s planning department.
“The U.K. press has been full of stories suggesting we aren’t doing too bad, but if you look at the data more closely things are tipping down – apart from tourism – given the weak pound. We are likely to see rising inflation, rising unemployment and falling residential and commercial property prices over the coming months,” he says.
In the Aug. 31 edition of the website PropertyWeek.com, writer Richard Williams reports that “the City of London market had been facing the prospects of a supply glut with a number of schemes due to come on stream in 2019.”
This suggests that post-Brexit caution is tempered by supply conditions that already existed before the referendum, “so most commentators are sanguine about the newfound caution,” Mr. Williams says.
“Vacancy levels in the city remain at record lows of 6.2 per cent and are as low as 2.3 per cent in other areas of the capital. With supply tight, rents are likely to hold up and have yet to drop in any of the London markets.”
Mr. Williams also notes that the London commercial market appears to be bolstered by many rental deals that included a “Brexit clause” allowing renegotiation, “with extra incentives such as longer rent-free periods or break clauses.”
Mr. Pollard says one of the incentives keeping major developers interested in London is the city’s extensive work to upgrade and improve its infrastructure, including public transportation.
The 1 Undershaft project is walking distance to London’s Liverpool Station, which is going to be one of the hubs for Crossrail, a new commuter rail line that will include new stations as well as upgraded existing ones.
The central portion, to be called the Elizabeth Line, will open in 2018.
“It [1 Undershaft] is an ideal location. We’re working on a number of tall buildings in the City of London and, in fact, all of these are proceeding,” he says.
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