Is the Qatari backed Shard an Icon or an Eyesore?
As Qatar's investments have grown larger, so has the controversy surrounding some of its actions. And with its largest investment to date - at least in terms of reputation - Doha must once again tread a fine line between diversifying wealth and maintaining relations.
In early July, on the south bank of the river Thames in the United Kingdom (UK), construction was officially completed on the exterior of Western Europe’s tallest building: The Shard, a 310 metre, 95-storey, mixed-use skyscraper that has transformed the south-eastern corner of Central London, in an area that had long stood in the shadows of the city’s financial district on the north bank of the river – to the extent that those at the top of The Shard can now look down across the river on its contemporaries.
Yet the towering monument to what can be achieved in the middle of a financial and economic crisis, would not have got off the ground were it not for some wealthy backers 3000 miles away in Doha, Qatar.
“The Shard will be one of the tallest buildings in Western Europe. For me however, the height of The Shard is only secondary,” Qatar Central Bank governor HE Sheikh Abdullah bin Saud Al Thani said at the building’s inauguration. “What is special is the solid and continuing relationship between two nations – Qatar and Britain – which has been an important factor in completing this project.”
Today, the state of Qatar is the economic driving force at the top of The Shard, a force that can now look down across the city of London. And the purchase bears all the hallmarks of the brave new Qatar: a financially solid investment with some guarantee of healthy returns, while simultaneously raising the profile of the country on the global stage.
“The Shard has already become an important symbol for London, a symbol of our close relationship, rooted in the foundations of economic growth, social development and mutual trust and goodwill,” Al Thani said. But not all agree.
Ever since its design was first unveiled, The Shard has been an object of disagreement. At the planning phase, English Heritage, the body responsible for protecting historic sites across England, slammed the design of the building, and in particular, the manner with which it intruded upon views of both the Tower of London – a world heritage site – and Saint Paul’s Cathedral.
London-based art critic Jonathan Jones said of the tower: “This is an architectural catastrophe for London. Forget what this ethereal spike would look like in a city of towers, a financial district already soaring. Stabbed into the historic fabric of a city that has never built especially tall…it seems a lunatic attack on London.”
To some, the tower is incongruous. It shoots skyward from an area where old juxtaposes new in the architectural sense, but it does so in a manner that unleashes a new scale of development, one completely at odds with its neighbouring buildings.
Quoted in London’s The Guardian recently, architect Piano rationalised and defended his creation against its many critics, saying the building simply had to be located where it is. “This building is not made with the intention to be aggressive or powerful,” Piano told the London-based newspaper. “This building is telling a completely different story. It is celebrating a shift – in the idea that growth in a city should not happen by building more and more on the periphery…Would you expect hostility? Of course. You have to accept as an architect to be exposed to criticism. Architecture should not rely on full harmony. If everyone is agreeing, then you made a big mistake.”
For Qatar, interestingly, the controversy also puts the tower in the same light as another London property development, and one that also involved a major Qatari investment – the Chelsea Barracks site – illustrating the tightrope of sensitivities that Qatar must tread as it spreads its wealth around established cities.
Five years ago, Qatari Diar, the property arm of Doha’s sovereign wealth fund the Qatar Investment Authority, purchased London’s Chelsea Barracks site for QR5.6 billion. Qatari Diar put forward a planning application to construct 552 flats across 17 blocks on the site, but the plan met with fierce opposition – from none other than Prince Charles, heir to the British throne.
Prince Charles, long a traditionalist in the architectural sense, labelled the contemporary design “brutalist”. But the Prince’s intervention itself became a source of controversy, as the post-modern architectural community gathered its tanks on Prince Charles’ well-manicured lawn, branding him a “meddling Prince”.
Qatari Diar had gone to some trouble before hand to pre-empt any objection from the Prince. E-mails released by the UK court that looked into the application withdrawal “show that the Qatari royal family was concerned as much, if not more, about the Gulf state’s reputation as about profit on its development projects,” according to reports. For Qatar, global investment would appear to be more a case of reputation enhancement, than a case of profit.
THE BACK STORY
But to full tell the story of The Shard, we must divert to where it all began 12 years ago, way prior to Qatari involvement in the project. Legend has it, Italian architect Enzo Piano sketched the outline of an iceberg-like structure on the back of a menu during a lunch meeting with UK-based property developer Irvine Sellar, chairman of the Sellar Property Group and the man who undertook to redevelop the London Bridge area of the city.
Despite heavy opposition from numerous groups, the UK government granted planning permission to the Sellar Property Group in 2002 citing, much to the chagrin of many of the development’s opponents – and its architectural critics were many – to the “exceptional design” of the building.
However, there was one factor that no property developer could have hoped to plan for looming on the horizon – the 2007/8 credit crunch, and resulting financial and economic crises. The convergence of construction and dual-crises could not have been more unfortunate for the Sellar Property Group, but all was not lost. Like many across the West at that time, Sellar turned to the recession-proof economy of Qatar in a bid to get his project, quite literally, off the ground.
It was December 2007 when Irvine Sellar announced to the world that his flagship project had been saved by the hydrocarbon riyals of Qatar. A consortium of three Doha-based banks – Qatar National Bank, Qatari Islamic Bank and QInvest, alongside Qatar property giant Barwa – each purchased 20 percent of LBD.
Today, The Shard is owned by LBQ (London Bridge Quarter) Limited, a body made up of the State of Qatar, which is the majority shareholder with 80 percent, and Sellar Property Group, which holds the remaining 20 percent. Additional, non-equity funding was put up by Qatar National Bank. And the investment is already shaping up to be a sound one (see box on page 55).
A TOWERING ILLUSTRATION
Speaking at the inauguration of the building, Mayor of London Boris Johnson gave a typically glowing appraisal: “The Shard is more than just an amazing feat of engineering,” he said. “It is a towering illustration of London’s determination to beat the recession and spur economic growth.”
Despite the colourful prose, Johnson’s words opened a door on the motivation behind Qatar’s move. For Qatar, The Shard marks one investment in a long line of prestige purchases designed to put the tiny gulf state on the world map. The Shard joins London department store Harrods, legendary car manufacturer Porsche, and a host of luxury brands and high-end developments across the world under the umbrella of Qatari ownership. It is about buying influence, and such investments, collectively, could one day prove to be worth infinitely more than the price tags attached to them.
The boost to international relations between the two countries is reflected at grass-roots business level, with UK firms eyeing Qatar and the wider Middle East as a swiftly emerging region – one with potential that has perhaps seeped out of markets closer to home, namely across the troubled eurozone.
Only last month, the Qatar Luxury Group, a subsidiary of the Qatar Foundation, acquired a 38 percent stake in UK-based luxury goods manufacturer Hindmarch. And as early as the start of September, Hindmarch announced its intention to open an outlet in Kuwait as early as October, as well as investing elsewhere across the Middle East.
The deal may sound small, and Hindmarch may not be on the scale of The Shard when it comes to prestige, but the willingness of the company to invest in Middle East is reflective of the great shift in capital that has taken place since the financial crisis from west to east.
And although the flow of investment is to an extent two way – “This iconic, sparkling new addition to the capital’s skyline will act as a huge commercial magnet, pulling in scores of new businesses and offering vital employment opportunities for thousands of people,” as Johnson said of The Shard and the surrounding area – it is Qatar that stands to gain over the long term.
Yet financial returns are one thing, but the boost to income that can be garnered through good international relations is another, and in Qatar’s case, the story of The Shard illustrates that the line between the two is growing ever finer.
To Rent… If you can afford
Qatar’s investment in The Shard, a mixed-use development boasting office space, a hotel, restaurants and high-end residences, though primarily one of reputation building, is also about cold, hard cash. The state has a responsibility to its citizens to ensure money is spent in a manner that will guarantee returns as Doha aims to diversify its economy over the long term.
And already, the huge amount of capital that was injected into The Shard looks like it could generate financial returns as well as reputational ones. According to commercial real estate consultancy Jones Lang Laselle,
London is today the most expensive city in the world for renting prime office space, at almost QR6200 per square metre per year. At 2,926 square metres, the largest floor in The Shard could in theory command rental income of more than QR18 million on an annual basis.
A second real estate consultancy, CBRE, backs this assessment “London’s strategic and geographic advantages to Europe have helped the market command high rents.
The limited supply of large and new product will continue to support rents,” the company says in its most recent study of the office rental market. In addition, London is pulling in more than its fair share of foreign investment – from the Middle East, among other regions – into real estate, ensuring a comparatively buoyant economy, Jones Lang Laselle says: “Favoured destinations among Asian investors included New York, Miami Beach and London, while Middle Eastern investors acquired in Chicago, Budapest, Dublin and London,” the group says in its Global Market Perspective report into the third quarter of this year.
“Asian investors seem particularly cautious about the Eurozone, and therefore only concentrated on London; Middle Eastern investors generally seem more comfortable, and continued their strong focus on several other cities in Europe, especially Paris and Geneva,” the study adds.