On the face of it, the decision by luxury jeweller Tiffany & Co to take office space at the Shard doesn’t appear to be a particularly significant property story.
And in and of itself, it isn’t. The retailer has paid a fairly unremarkable rent of £55/sq ft to £60/sq ft for 8,000 sq ft on one of the lower floors.
But make no mistake, this seemingly little deal represents a very big deal for the Shard and surrounding London Bridge and South Bank area. For one, Tiffany is a retailer, so a very different tenant from the more conventional moneyed occupiers that have so far taken space there, or the likes of News UK, which is moving to the nearby ‘Baby Shard’.
Is the area now in a position to take on the City? Office rents are on a par with or undercutting the City’s £50/sq ft to £70/sq ft and coming in at around half the West End’s top rent of £130/sq ft. More crucially, and worrying for the City given it’s right on its doorstep, it is also turning into a very nice place to work and hang out.
Whereas the City follows no coherent plan (unsurprisingly given it’s evolved over hundreds of years), the London Bridge area is really starting to take shape - and gain critical mass - now it has the Shard and the redeveloped London Bridge Station alongside the existing attractions of Borough Market and a strong leisure and residential offer.
It lacks only one thing. Sadly for us bling-loving women and the area as a whole, Tiffany is only taking office space at the Shard. Where is the compelling retail offer? Though there are decent shops here and there, the area has nothing even approximating a destination shopping area… although it could have, if the rather unloved (yet potentially loveable) Hay’s Galleria were integrated into the vision.
A fully developed, mixed-use area with the Shard and London Bridge Station at its epicentre, now that would turn heads. Quite how many will be turned by City sore thumb the Gherkin remains to be seen. Tellingly, it’s on the market for around £640m - not much more than the £630m it sold for in 2007.
Left in the shade by the likes of the Shard, the Cheesegrater and the Walkie-Talkie, it is debatable how much interest the Gherkin will attract from the UK funds, though foreign investors will no doubt take a look and there’s always the potential that a British Land, Norges or Land Secs looking for a (somewhat tarnished) trophy asset might go for it.
There’s certainly plenty of money swilling around at the moment - which, coupled with a real dearth of supply, is pushing prices inexorably (and sometimes artificially) upwards.
But let’s not get ahead of ourselves with all this top of the market talk. Yes, the London residential market is getting toppy, as are pockets of the London office market, and yes, there’s much more investment activity than you would usually expect at this time of the year, but as we report on page 12, industrial is way off the peak and the wider office market has some way to go before it turns into an out-and-out sellers’ market.
Buyers will always find somewhere to invest their money. Even if London is approaching a peak, the regions are only at the beginning of the recovery
curve. You can be sure they’re not about to call the top of the market.