This is Perlan, sitting on a hill overlooking the domestic airport and the rest of the city. Yes, it holds water in its tanks, and the location has been used that way for decades. But in 1991, the place was updated.
The first floor has some open space, and has been used for concerts and conference center. When we visited, people were voting there for the Presidential election - so it can serve as a polling place. On the fourth floor is a cafeteria, souvenir stop, Christmas store, and observation desk. You can get 360 degrees of views from the city up there. Then on the fifth floor is a high-quality (read expensive) restaurant. Put it this way - President Clinton hosted a function there during his time in office; the thank-you note from Hillary Clinton to the chef is on display.
There's also a little public art outside the entrance just to round it out. You can drive up the hill to enter, or you can take a nice walk from the airport area.
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In March 2015, John and I walked up to Perlan from town in the evening and watched the northern lights over Reykjavik. Very cool.
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