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Taller Is Better As Bold London Skyscraper Bets Pay Off - Rents Up....

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http://www.bloomberg.com/news/2014-05-05/taller-is-better-as-bold-london-skyscraper-bets-pay-off.html

In the City of London office market, fortune favors the bold.

Rents for skyscrapers with nicknames like the Walkie Talkie and Cheesegrater rose faster than the rest of the financial district in the last three years, rewarding developers who started construction at a time when the economy was shrinking.

Those who took the risk are benefiting from a surge in demand that’s outstripping new space coming onto the market. The premium paid for offices in the towers compared with average City space has risen to 8.3 percent from 4.5 percent in January 2011, when construction on the Walkie Talkie and Cheesegrater began, according to data compiled by broker Knight Frank LLP.

“Skyscrapers achieve premium rents as the offices become part of a firm’s marketing,” said James Roberts, head of commercial research at Knight Frank. “There is the wow factor of taking a client into a meeting room where you enjoy panoramic views of the city.”

The superior performance of the office towers shows that the vertical transformation of the City that began a decade ago is back on track. The financial crisis interrupted a plan for a cluster of distinctive skyscrapers on the eastern edge of the City of London starting with the Gherkin at 30 St. Mary Axe, which opened 10 years ago last month. Developers postponed and canceled projects over the next three years as rents dropped by almost a third and struggling banks reined in financing.

Today it appears we are ramping tall / huge buildings.

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Who is renting all this expensive office space?

Most likely being paid by the developers. The scam goes like this:

1, The developer/scammer guarantees a set level of rental income for the new landlord/owner over the next 3 years, this is usually a good chunk above market rates.

2, The property is sold by the scammer based on the rent that they has set using their guarantee.

The end result is that developers can sell for much more money and the landlord gets a guaranteed rent for a few years. What happens after the guaranteed rent period is up? Well that's when the new landlord finds out that they have been scammed and they cannot get anywhere near the rent that the sale valuation was based on - the landlord is left holding the bag.

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an example perhaps ?

from last month

London's landmark Gherkin office tower has been placed into receivership by its creditors, Deloitte, the accountancy firm said on Thursday, paving the way for a sale of the skyscraper.

The Gherkin is co-owned by Germany's IVG Immobilien which has grappled with debt issues in recent years.

Last year, it sought protection from its creditors after failing to reach an agreement over the restructuring of its debt. It has since agreed a debt-for-equity swap with its creditors.

"The senior lenders were reluctant to appoint a receiver but felt they had no choice due to the ongoing defaults, which have remained uncured for over five years," joint receiver and Deloitte partner Neville Kahn said.

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Really? I always think that when you get such a view, the city reveals itself as a total mess that is normally hidden from view and cannot be grasped from the rather more pleasant ground level where essentially you are walking past attractive building frontages and fascias.

It's a similar sort of feeling you get when you catch a train into Town and you witness all the bits normally hidden from view, people's tatty back gardens, dumps etc

Ever been up One Canada Square, Canary Wharfe?

EDIT: I should perhaps add we should be thankful that it looks like a mess. If a city is designed along clean geometric lines, it is usually a sign that the city has been ruled over by a megalomaniacal tyrant.

I have worked 25 Canada Square. Bank occupies the lower floors, the rest is sublet out. The floor I was on was occupied by one of those serviced office firms, that sublets again. I worked for an ISP that rented a small office.

Even working in the towers, doesn't give you a sense of the true occupancy rate!

Edited by aSecureTenant

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