Friday, 19 August 2011

British Land and Blackstone start demolition of 4 and 6 Broadgate to make way for new UBS London headquarters

After the Secretary of State for Culture, Olympics, Media and Sport, Jeremy Hunt confirmed in June that he had decided not to list British Land and Blackstone’s Broadgate Estate in the City of London; the UK-based property developer has moved to appoint John F. Hunt Demolition responsible for tearing down both 4 and 6 Broadgate, in readiness for construction of the 700,000 sq ft 5 Broadgate office development, which will be occupied exclusively by Swiss bank UBS as their new London HQ.

The Essex-based demolition contractor has already started the soft strip of the now-vacant interiors, having erected the usual perimeter hoardings and scaffolding, clad in fire retardant Monaflex sheeting –fondly referred to as the white sheet of death. Work will take place between 08:00 and 18:00 Monday to Friday and between the reduced hours of 08:00 and 13:00 on Saturdays with the entire demolition works set to be completed within 52 weeks, prior to the start of basement works.

On 19 April 2011, British Land boldly announced that the City of London (CoL) Corporation’s Planning Committee had granted full planning permission for the development, however English Heritage subsequently recommended the entire 1980’s development for Grade II* listed status. For Blackstone and British Land this represented a major headache as unlike all of the other towers currently under construction in the square mile – 20 Fenchurch Street, The Leadenhall Building and The Pinnacle etc – 5 Broadgate was designed around the specific needs of a known client, UBS.

For commercial property developers in the City, large trading floors are viewed as an absolute necessity when it comes to attracting banking tenants, however nothing comes close to the four 62,000 sq ft trading floors that lead architect, Make has effectively designed 5 Broadgate around. Whilst controversial, the building is anything but a typical office development, which means that if Jeremy Hunt had decided to list the site then UBS would have been left with very few alternatives.

For the CoL Corporation, who lobbied hard on behalf of the development, it was effectively last chance saloon as they knew only too well that the only viable alternative open to UBS in the event of Broadgate being given listed status would almost certainly have been a move to the dreaded C word, Canary Wharf – with JPM’s consolidation at 25 Bank Street set to start this year, UBS and Deutsche Bank are the only truly global banking groups that remain in the City. Any notion that UBS may have ever looked to leave London should be dismissed as nonsense.

As a result, Canary Wharf Group (CWG) were known to be actively monitoring the situation, as in 1 Bank Street (formerly Heron Quays West) they still have a building with planning permission that could comfortably accommodate UBS – the Swiss bank have been linked with a move to Canary Wharf several times but have always chosen instead to remain in the City. The part 12, part 21 and part 33-storey, Bank Street building however, boasts trading floors of up to 87,500 sq ft and with 1.3m sq ft of space would have allowed UBS to consolidate its London staff into one site.

The speed with which demolition has since commenced underlines British Land’s urgency to get the site pulled down before the potential for any further delays. Whilst the Broadgate Estate is now joint owned with Blackstone, UBS is still the REIT’s single largest office customer by some distance, worth around 3.8% of the group’s total rent, which for the full year ended 31 March 2011 stood at £518m, meaning that UBS paid BL around £19.7m last year, money that they could simply not afford to lose.