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.

Canary Wharf Group announce construction restart at 25 Churchill Place as European Medicines Agency pre-lets 250,000 sq ft

Canary Wharf Group (CWG) surprised the markets this morning when it announced that the European Medicines Agency (EMA) has agreed to pre-let 250,000 sq ft, or approximately half of the total space in 25 Churchill Place, the final piece in the original Canary Wharf jigsaw puzzle. The 20-storey building, which will stand directly opposite Barclays global headquarters has already been constructed to basement level, however after the American insurance and reinsurance giant, Aon walked away from a deal, the site has laid dormant for several years with three schemes of varying height since worked up.

In a telling sign of the underlying confidence that is driving the London commercial property market, CWG – well known for their conservative approach to construction on the Docklands estate – has opted to develop what they term the 'high rise' option at 25 Churchill Place, which consists of a Kohn Pedersen Fox (KPF) designed tower of 20-storeys, which will offer approximately 550,000 sq ft of Grade A lettable space. EMA has agreed to take the promenade, ground and the first nine office floors with the option on a further four levels, each of around 27,400 sq ft.

In keeping with several recent deals by CWG, EMA – responsible for the evaluation of medicines developed for markets in the European Union – is already located in the Wharf, currently occupying space at 7 Westferry Circus, which they will vacate once construction, which will be carried out by Canary Wharf Contractors (CWC) is completed. The EMA will pay just £46.50 per sq ft on a 25-year lease, which commences from 1 January 2015 without break, which translates into minimum revenue of £290m over the term, which also includes upwards-only rent reviews every five years.

The deal, which also includes a 37 month rent free period that will effectively be used to fund the internal fit-out of the building, highlights the long-standing financial benefits to firms of being based in Docklands as opposed to the City, where comparable rents are £55 psf – a premium of around 15% or an impressive £43m over the 25-year lease that EMA has signed for.

For CWG, this latest letting also represents another major step forward as it looks to modify the tenant mix on the estate from one of high finance to high-value firms in the oil and pharmaceutical industries. The recent letting of 187,000 sq ft of space at 40 Bank Street to Shell can be seen as another key indicator of this new strategy, which in theory reduces the risk of another Lehman-sized void left on the estate given the continued economic challenges that the banks face.

Tower-cranes will return to site in the final quarter of this year, with CWG also confirming that it is now in active discussion with several commercial lenders as it seeks to fund the construction phase. The group will look to let the remaining floors as the building takes shape and will be keen to ensure a 100% occupancy rate given that several buildings on the estate, including both 5 Churchill Place and 30 North Colonnade remain only part-let with a combined availability of over 400,000 sq ft. This element is hugely important to CWG, whether they directly own the asset or not as they look to maintain rent levels across the estate by ensuring the supply of space does not outstrip demand.

The Leadenhall Building rises as Laing O'Rourke secure square miles most sought-after contract

British Land and its joint venture partner, Oxford Properties have finally confirmed that construction of their iconic 47-storey tower, The Leadenhall Building will be carried out by UK engineering group, Laing O’Rourke, who have recently completed Hines’ nearby Cannon Place scheme in the City of London, which sits above Cannon Street station. The news follows a spate of construction starts in the City with demolition works for Great Portland Estates’ (GPE) 100 Bishopsgate now well advanced and Arab Investments stating that Brookfield will re-start work at the Pinnacle site, which will stand at the centre of what is a rapidly emerging cluster of tall buildings.

The role of main contractor was hotly contested within the construction sector, with Balfour Beatty, Bovis Lend Lease, Mace, Skanska and Sir Robert McAlpine all having submitted bids for the £318m contract, which will see the 224m tower reach practical completion in 2014 with construction having restarted in January this year. British Land has already successfully pre-let a massive 191,718 sq ft of space across levels four to 13 to the Chicago-based insurance and reinsurance giant, Aon who will consolidate from several City locations, having agreed to pay £55.00 per sq ft for the privilege, with an option on a further 85,273 sq ft on levels 14 to 18 should they need it.

The Rogers Stirk Harbour + Partners-designed tower, which will stand opposite the now-listed Lloyds of London building is viewed by many as the centrepiece of the City’s new skyline, which will be at various stages of construction by the time of the London 2012 Olympic Games in a year’s time. At 122 Leadenhall – set to be known as the Aon Centre post-completion – Laing O’Rourke will start by erecting a tower-crane on the basement level-three, which itself will be used to take down the existing red tower-crane in the northern section of the highly-constrained site. In total, four tower-cranes will eventually be in operation.

 Similarly, those walking along Leadenhall Street will soon notice the existing hoardings replaced and the access ramps – visible through the site access doors – removed to allow for construction of the basement levels up to the ground floor concrete slab. At this point the distinctive steel mega-frame, which also provides the tower with its impressive atrium, will commence construction. The steel superstructure, which is set to be built around a T-shaped strong-box in the centre of the building, will follow soon after. Unlike on most sites however, the service core to the north of the building, which houses the high-speed lifts and plant, will be installed ahead of the steel owing to its modular design and manufacture, which should see the tower race up ahead of rivals.

The Leadenhall Building looks set to be a showcase for British design, engineering and construction, however at its heart remains a commercial proposition and both British Land and Oxford Properties will be keen to let the remaining space in the building at a price significantly ahead of the £55.00 psf that Aon will pay to ensure its long-term financial viability. British Land has seen its share price underperform in recent months when compared against Land Securities, who themselves are pushing ahead with construction at their nearby 20 Fenchurch Street site and so will be looking at tenants for the more lucrative upper floors, which demand a hefty premium.

One such potential tenant is the FTSE100-listed, RSA Insurance Group who British Land has dealt with before when RSA took space in Plantation Place. The insurer is said to be considering the rest of the floors at The Leadenhall Building as they will likely have to vacate their current office, all 109,000 sq ft at Leadenhall Court – itself a mere stone’s throw away from the new tower – as new owner Hammerson looks to redevelop the site, possibly with a tall building. British Land will know that RSA already pay £65.00 psf at 1 Leadenhall Street so will be looking at a decent premium.

As cranes battle with steel superstructures on the City’s skyline, the square mile will be transformed as developers look to provide the Corporation of London with the large floor plates and tall buildings that it needs to at least try and halt the flow of banks and financial institutions to Canary Wharf and while British Land are battling with Hammerson, GPE and Land Securities for those all important signatures, we now know that it will be Laing O’Rourke that are building the beauty itself, 122 Leadenhall.