Credit Crunch Could Delay "Shard" Building

Construction of U.K.'s tallest office tower, "The Shard" in London may be delayed by rising borrowing costs, according to its developer CLS Holdings Plc said.

Sten Mortstedt, chairman of CLS, said in a statement yesterday that talks about financing the project "have, unfortunately, been affected by the recent adverse credit markets." CLS shares plunged 68.25 pence, or 13 percent, to 466.25 pence in London. The company, which first sold shares to the public in May 1994, said it won't start any major development works on the Shard and the neighboring New London Bridge House until the loan finance is secured.

If the project is delayed to long there is a considerable risk that the "Shard" may lose some of its key tenants. Transport for London agreed to lease 190,000 square feet for 30 years on the lower floors last year. In 2005 Shangri-La Asia Ltd., the largest Asian luxury hotel group, signed a 30-year lease take 18 stories between floors 34 and 52 in the new building.

Work on the 72-story building, which will cost about £400 million pounds , was due to start later this year. Designed by Renzo Piano, it will be London's first 1,000-foot (305-meter) tower when it's completed in 2011 and will stand on the south bank of the river Thames by London Bridge.