When London’s The Leadenhall Building – or ‘Cheesegrater’ – was sold for £1.15 billion ($1.52 billion; €1.26 billion) to Hong Kong investor CC Holdings in March, breaking the UK record for a single office property, many observers believed the deal represented the peak of the market. Little did they know; the record would soon be broken by another nicknamed property just months later.
Famed for its distinctive top-heavy structure, 20 Fenchurch Street, or ‘The Walkie Talkie,’ was acquired by another Hong Kong investment firm, Lee Kum Kee, for £1.29 billion in July, defying forecasts that London’s office market had gone soft following Brexit.
“We started it in 2010 and people said, ‘What on earth are you doing?’ — now it’s sold at record pricing.”
– Rob Noel
The 37-story building’s co-developers, UK property firms LandSec and Canary Wharf Group, were under no pressure to sell. But the offer was too good to turn down, as LandSec’s chief executive Rob Noel reflected at the time: “No asset is sacrosanct and this is a price at which we have to sell.”
The Walkie Talkie’s backstory has two clear narratives. One concerns the context in which it was built, with design and construction straddling the global financial crisis and its sale coming during the political fallout of Brexit. “We started it in 2010 and people said, ‘What on earth are you doing?’ – now it’s sold at record pricing,” said Noel.
The other narrative regards LandSec’s ambition to construct, in its own words, “an innovative, counter-cyclical and, most importantly, sustainable” office tower in one of the world’s most keenly-priced financial districts.
Beyond the standard features you might expect to see in a modern, sustainable piece of real estate, such as bike racks, heating and lighting sensors and recycling bins, with the Walkie Talkie, LandSec has taken things further. The building features a 7,000-square-foot Green Wall, the largest in the UK at the time of installation; a triple-tiered Sky Garden, the highest public park in the country; and a £2.5 million hydrogen fuel cell, the first in the Square Mile, which powers the building.
Straddling the crisis
LandSec’s head of engineering, Neil Pennell, who has been part of the 20 Fenchurch Street project since its 2005 inception, recalls discussing the possibility of a city office building containing a hydrogen fuel cell with an excited Ken Livingstone, predecessor to Sadiq Khan and Boris Johnson as mayor of London.
“We received planning permission for the building when Livingstone was mayor; I remember making a presentation to him. He was particularly interested in the fuel cell and the implications for it,” says Pennell.
The firm set out its ambitious design plans in 2006 and received planning permission, in its original form, from the City of London Corporation a year later. Demolition of the site’s original 91-meter structure took place in 2007, but a judicial review, triggered by the UK government, ruled in favor of English Heritage, a UK charity that protects historic buildings, which had complained about the height.
“There’s a conservation site near 20 Fen, at London Bridge and the Tower of London. But we were within the guidelines,” recalls Pennell. “However, it slowed us down by about six to 12 months. Then the crash happened and we couldn’t take things forward.”
Additional planning permission was eventually secured in 2009 after developers agreed to reduce the building’s height by nine stories, as per the review.
“When we came out of the downturn in 2010, we had the chance to get the project moving again. However, because of the perceived risk, we had to find a joint venture partner, which is where Canary Wharf Group came in. It had a construction arm so took the lead on that side of the development, while the operational side fell to LandSec,” adds Pennell.
The building was completed in 2014, the fuel cell added a year later and, in 2016, the Chartered Institute of Securities and Investments took over the last remaining lease.
Fueling ambition
Of the building’s main sustainable features, it is the hydrogen fuel cell that LandSec is proudest of. Not just because it was the first of its kind in the Square Mile, but because it is at the heart of the building’s sustainability strategy.
The fuel cell, using the same technology developed for the Apollo and Shuttle space missions, generates clean power and reduces the building’s carbon emissions by 7 percent. That equates to 270 metric tons per annum, preventing the escape of 18,000 metric tons of pollutants compared with conventional combustion-based power generation.
“We feed it very clean, high pressure gas and clean water,” says Pennell. “This triggers a chemical reaction in the fuel cell and electricity is produced. You also get a by-product of heat and we can use that heat directly or convert it for cooling using chillers.”
The cell was sourced from Danbury, Connecticut-based firm Fuel Cell Energy and provides both an electrical and thermal output of 300kW – about adequate to power 800 average sized households.
Caroline Hill, LandSec’s head of sustainability, says the fuel cell was challenging because it is a relatively new technology.
“It was a great learning curve for us and if we decided to use one in another building, it would certainly be less challenging.”
Staying on top of these challenges is key, she says: “With sustainability, you have to be ahead of your customer or your stakeholder. Otherwise, by the time the building is complete, you can be behind the curve.
“We use a concept called the ‘sustainable development brief,’ which sets out our expectations on projects such as this. It focuses on each stage of development and looks at how we can factor sustainability into each part of the process, from initial design to construction, to end use with the customer.
“But there is often a discrepancy between design and use in terms of energy consumption. One of the things we are very active on is monitoring all of our buildings, including customer spaces, so we have a team of energy managers working with customers across the portfolio.”
Sky gardens and green walls
It was widely reported at the time that one of the key factors that enabled LandSec to secure planning permission for such a well-located tower was the inclusion of a public park in its design.
The Sky Garden (pictured), which has become a popular tourist destination in its own right, is a triple-tiered botanical area located on the top three floors of the building. It contains a restaurant, bar and viewing platform offering a 360-degree view of the city. Much of the garden’s flora was chosen following consultations with the Royal Botanic Gardens, in west London. The plants on the top tier contain a number of prehistoric offerings, and as guests move down to the lower two tiers, the plants become more contemporary.
Atop the Sky Garden are 250 50kW peak roof-mounted solar photovoltaic panels which generate around 27,300 kilowatt hours of electricity each year. The solar panels also save an estimated 13,260 kilograms of carbon dioxide annually.
Another feature of 20 Fenchurch Street is its Green Wall. At more than 7,000 square feet, the living wall contains around 52,000 plants including ferns, shrubs and grasses. It was installed in 2014 by UK-based living wall specialists Biotecture on an annexed service structure opposite the main building.
“Rather than reduce carbon, its main function is to create a better environment for workers,” says Pennell. “It produces oxygen and provides sound proofing, but also contributed to our BREEAM ‘Excellent’ rating.” The organization, in its 2015 report, praised the wall for providing a “much-needed plant and insect ecosystem.”
Investor enthusiasm
According to Hill, LandSec’s investors expect a company of its size to take sustainability very seriously. Since the Paris Climate Change Agreement, the firm has seen an uptick in questions from investors and more awareness from them of the importance of carbon reduction in real estate.
“When the first plans for 20 Fen were drawn up, I’m not sure it was top of their priorities,” says Hill. “But part of the art of property development is that there are huge time lags between concept and completion.
So, you have to put yourself in the shoes of the investor, customer or stakeholder we are working with a decade before and think about future-proofing the asset by coming up with ideas back then.” There is also difficulty in ‘disaggregating’ the return and cost saving produced by
separate features such as the Green Wall and fuel cell. “It’s tricky to strip out the individual elements in the building and quantify how much of a saving each makes. Rather than that, we are focused on ensuring these techniques are embedded in the way we operate at LandSec, in everything we do,” says Hill.
“The fuel cell has a long-term payback, but there are other areas where you can see returns within 18 months. For example, we have an ongoing program to replace LED light bulbs this year. There is a perception that sustainability comes with a premium but it can save costs in the long run too.”
Don’t forget the ‘S’
Historically, Hill says, investors have been focused on the ‘G’ element of ‘ESG’, while the ‘E’ has received an uptick in interest in the last decade. “Governance concerns have always been there, from a company’s structure to the level of diversity to bribery and modern slavery concerns,” she adds. “But there’s been a definite shift more recently to the social side.”
In line with the ‘S’ of ESG, in 2015, LandSec and Canary Wharf Group created the 20 Fenchurch Street Legacy Fund, which provides grants for community groups in the east London. “The idea behind it is to provide help for the city fringes. The environment really changes if you walk less than a mile from the Square Mile. We have numerous funds, but this one is really building-specific and is well supported by most of the tenants,” says Hill.
“Separately, LandSec runs a community employment program for jobs in construction, hospitality and customer service in our portfolio. To date, we have put more than 1,000 people back into work. We also have a program in Brixton Prison, in south London, to help train prisoners for careers in construction after release.”
While LandSec has now handed over the keys to one of the most recognizable assets in its portfolio – and one that, sustainability-wise, it is most proud of – its commitment to ESG continues. Colette O’Shea, managing director of its London portfolio, sums up: “This is a building where we pioneered new technologies, new methods of efficient design and new attitudes to public space, at a time when most of the market was playing it safe.”
For LandSec and its partners, however, the risks they took were measured and their gamble has evidently paid off.
BREEAMing with pride
In 2015, 20 Fenchurch Street was awarded an ‘excellent’ BREEAM rating of 80.2 percent, making it one of the most sustainable properties in the City.
BREEAM used cutting-edge thermographic surveys, similar to fire and rescue teams, to check the building’s façade, which was found to conform to precise heat loss performance standards.
The green wall and solar panels were praised by assessors, as were its sustainably-sourced concrete and steelwork.
The project was also one of only 80 globally to receive an FSC Timber Certificate for its use of wood from responsibly managed forests.
Other contributing factors to the rating included the diversion of 96.4 percent of construction waste from landfill; the use of recycled material throughout the process; noise and air monitoring during construction; solar shading, reducing the cooling demand of the building; the optimum use of natural daylight; and the naturally-ventilated Sky Garden.
“The energy efficiency of the building is maximized through the integration of a fuel cell and photovoltaics together with selection of low environmental impact materials,” said Tobias Andrews, the BREEAM assessor. “The installation of the green wall was assessed as providing the optimum enrichment of plant habitat, thereby achieving the maximum BREEAM credits given the space available.”
Caught in the odd controversy
While 20 Fenchurch has attracted praise for its design and the sustainable approach taken by its developers, the building has also garnered its share of criticism.
The height of the flak culminated in 2015 when it was awarded the infamous Carbuncle Cup, an annual prize created by UK property publication Building Design and awarded to the UK’s ugliest building. One of the more memorable media quotes described it as a “bulbous comedy villain of the London skyline,” while another compared it to a “broad-shouldered banker in a cheap pinstripe.”
But the Walkie Talkie’s most notorious transgressions happened before it was even open. In 2013, its south-facing glass façade channelled the sun’s rays into a beam of heat that melted the fender of a car, blistered painted shop fronts and singed carpets – with temperatures hot enough to fry an egg on the sidewalk. The furore led to further nicknames such as the “Walkie Scorchie” and the “Fryscraper,” forcing architect Rafael Viñoly to add ‘sun shades’ to prevent the reflection.
Its troubles did not end there. The building was then found to have an embarrassing wind problem after the downdraft caused by the tower’s curved exterior created a wind tunnel that knocked over pedestrians.
Following several changes to his original design, Viñoly famously said: “My name is on it, but it’s not my building.”
By the numbers:
20 Fenchurch Street (aka ‘The Walkie Talkie’)
Height: 160m
Area: 668,926 sq ft
Capacity: 5,000
Architect: Raphael Viñoly
Co-developer: Canary Wharf Group, LandSec
Construction started: January 2009
Completed: April 2014
Cost: £453m
Sale price: £1.285bn
Stories: 37 (inc three-story Sky Garden)
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