St Paul's Place: Two government departments signed a lease on an office development in the city centre regeneration scheme.

St Paul's Place: Two government departments signed a lease on an office development in the city centre regeneration scheme.

Done deal: St. Paul's Place

By Colin Marrs Monday, 22 February 2010

A council used its borrowing powers to enable government departments to find a new home.

Sheffield is home to more than 2,000 civil servants and, in 2005, the Government began a review of its accommodation needs in the city. In 2008, this led to the Home Office bringing together staff from five offices into a new regional headquarters. One of its former homes, the city centre Moorfoot building, also housed staff from two other government departments, the Department for Education and Skills (later broken up when the Department for Children, Schools and Families and the Department for Business, Innovation and Skills were formed) and the Department for Business, Enterprise and Regulatory Reform (now also part of the new business department), which were left in an office that was too big for their needs.

As a result, a search began for other office space in the city. Property consultancy DTZ was called in to find a new home for these 800 staff. DTZ director Simon Williams says: "We were looking for a design and build contract, because at the time those deals were relatively cheap."

A competitive process came up with a number of options. But due to the credit crunch, design and build schemes became more expensive than buying existing buildings, so an exercise to buy a recently completed building in Sheffield began in 2009.

At the time, developer CTP St James was building No 2 St Paul's Place, a speculative, city centre office scheme that is part of its Heart of the City regeneration scheme. CTP St James had sold its leasehold interest to pension fund Standard Life in 2007. Sheffield City Council owned the freehold and persuaded the government departments that the building would suit them.

The council, which also owned the freehold to the Moorfoot office, had plans to demolish this outdated and inflexible building and redevelop the site as part of a new office quarter. But there were two barriers. The Government decided it was too risky to hold leases on both the old and new buildings concurrently, so it wanted to sell its Moorfoot lease before moving. In addition, the council had hoped to buy the Government out of the lease with proceeds from selling its freehold in the St Paul's building to a developer. But an investigation found that this route could delay the move by years.

Because it was keen to retain the civil servants in the city, the council decided to ask regional development agency Yorkshire Forward to provide gap funding to buy the Moorfoot lease, freeing the government departments to buy the lease on the St Paul's office.

But things did not go to plan. Neil Jones, senior development surveyor at the council, says: "For quite valid reasons, Yorkshire Forward decided to invest in the streetscape (near Moorfoot), rather than the lease." Undaunted, the council resolved to use its borrowing powers to buy the lease itself. This deal was signed in July 2009.

Last September, the government departments signed a 250-year lease on No 2 St Paul's Place. Staff are due to move in later this year.

Jones says the deal has benefited all parties. "The council taking complete ownership of the Moorfoot property, in a good strategic location, will make any redevelopment of this area much easier," he says. "The move has also secured some high-level civil service jobs in the city. Thirdly, it has helped fill a speculatively let office block scheme in a difficult economic environment."

CTP St James chief executive David Topham agrees. "Because of the economic climate, we will not be developing (Heart of the City's) next phase on a speculative basis, so we need to attract tenants before we start work," he says. "Undoubtedly, filling No 2 St Paul's Place helps us market the location."

KEY FACTS

The deal Sheffield City Council bought the lease of the city centre HQ of two government departments to allow them to move to a new smaller office

Parties involved Sheffield City Council, the Department for Children, Schools and Families and the Department for Business, Innovation and Skills

Finalised July 2009

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