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British Lands Pragmatic Approach To Leadenhall

Unless you have been on Mars today you won't have missed the high profile announcement by British Land that they are going to delay the construction of the Cheesegrater, officially known as the Leadenhall Building.

This would-be iconic skyscraper will (eventually) stand in the City of London opposite Lloyds of London and the newly finished Willis Building and be 224.5 metres tall, over 40 metres more than the Gherkin.

Building a skyscraper is always a complex job to do and requires balancing a number of different factors together to insure the scheme is profitable. The most important of these are filling it up which means it requires a pre-let or to be built speculatively when the developer is sure it can be occupied as the Broadgate Tower has been by British Land.

The current declining economic climate has made this less likely to happen although the building with its small floorplates is most suited as a multi-let building for small prestigious companies rather than a major corporate headquarters which makes it easier to fill than a monolithic building.

Demand is much lower though and this would affect the prices tenants will be willing to pay. A delay of 12 months could easily add an extra 10 per foot to the rent levels which would come to perhaps 4 or 5 million pounds extra a year for the landlord.

The other main issue that British Land and their quantity surveyors Davis Langdon, will be wrestling with are the substantial building costs. Commodity prices affect the cost of building with steel prices being one of the biggest factors.

These prices are now beginning to slide having peaked earlier this year - oil for example, something steel prices are heavily tied to, is down from a peak of over $140 a barrel to about $113 today as demand for them falls thanks to the previous excessively high prices. Due to this, steel prices which are intimately linked to energy costs are expected to follow oil prices back down.

This is something that has already been recognised by developers such as Arab Investments and Teighmore who are building the Pinnacle and the Shard respectively. They have spent many well publicised months shaving every single penny they can off their contracts with suppliers.

Many of the coming skyscrapers also have their contract prices fixed. The existing steel contract for the Leadenhall Building is not meaning British Land have no guarantee on just how much the building will cost them to construct.

British Land has had no such major tangle over the cost of contracts with the construction of the Leadenhall Building so it makes sense for them to sit back and aggressively renegotiate the prices downwards improving the profitability of the scheme.

This doesn't mean work will stop on site immediately, the contractors who have been signed up and paid for will be able to continue for at least six months before they stop showing just how overly sensational the press reports on the subject have been. You don't believe everything you read in the newspapers do you?

The move by British Land does not signal the end of the world and is not an indefinite hold as some other projects are now lingering in such as the Lumiere skyscrapers in Leeds. It's a pragmatic decision that will see the tower completed now in 2012 instead of 2011 if the announcements by British Land are to believed.

Article Related buildings:

The Leadenhall Building

The Leadenhall Building
The Leadenhall Building
The Leadenhall Building