Strategy

London's Shard building, Olympics come at high cost

The Shard and the 2012 Olympics were supposed to revitalize London, but can the city afford them?


 


(Photo: Rex Features/Canadian Business)

The official opening of the 95- storey Shard building in London this July had it all: 12 lasers and 30 searchlights transformed the night sky into a dazzling spectacle. Completing the picture were the colossal 11.5-metre-tall Olympic rings suspended from nearby Tower Bridge.

The 310-metre Shard is now the tallest building in the EU. Funding shortfalls for the structure, designed in 2000, delayed its completion, and the tower ended up costing £500 million ($790 million) to build, much of it backed by Qatari investors. Despite its striking shell, however, the building is empty, having not yet attracted a single office tenant.

The Shard and the 2012 Olympics show off a side of London that is self-consciously larger than life—with larger-than-life price tags. The cost of hosting the Games has climbed dramatically. Venue construction, security and policing were initially pegged at £2.37 billion in public funds. That seems a quaint figure today. The official price tag shot up to £9.3 billion, but a recent investigation by U.K. media network Sky Sports claims it is actually more than £12 billion, and could ultimately balloon to nearly 10 times the initial estimate.

The British government has cast the Games as an urban regeneration project that will stimulate tourism. That upshot is still theoretical, though, while the costs are very real. In mid-July, hotels were marking down room rates because demand was lower than expected.

In some ways, the size and grandeur of the Shard and the Games are throwbacks to pre-financial-crisis Europe. Today, with Londoners grumbling under the yoke of belt-tightening austerity measures, the city’s appetite for lasers and massive sports arenas seems to be shrinking fast.