With more plot twists than an episode of Holby City, the story of Bristol city council’s 230,000 sq ft office requirement appeared to be turning property into soap opera.
Today, with plans for an expensive warehouse refurbishment ditched, and a deal now agreed that sees the council acquire Aviva’s 100 Temple Street for £18m, the full story can be told.
The back story is that Bristol city council had a serious problem. Up to 5,000 staff were spread across 35 buildings.
Last June, it set a £64m property budget to fund a plan to reduce office floorspace from 570,000 sq ft to 340,000 sq ft. The aim was to cut long-term council property costs.
The council-owned 185,000 sq ft A Bond warehouse at the Cumberland Basin, Hotwells, was identified, an option strongly favoured by the then controlling Liberal Democrat group on the council.
It did not take long for the city’s property industry to raise serious doubts about A Bond, and by September they were lobbying hard.
Ned Cussens, doyen of Bristol agents and a consultant at Jones Lang LaSalle, explains: “A Bond wouldn’t have produced effective workspace, and the location is poor.”
At this point, in November 2012, two new characters entered the drama: newly elected independent Bristol mayor George Ferguson, and the council’s newly appointed director of property, Robert Orrett.
Ferguson, an architect well known in the Bristol property world, had strong views (see feature, p66). He pressed officials on why an expensive refurbishment was being promoted when other options – including new-build – might have delivered better space for the £50m-£70m that refurbishing A Bond might cost.
The mayor’s question promptly landed in Orrett’s in-box. Also a well-known figure in the Bristol property scene, Orrett is a former head of BNP Paribas Real Estate in the city and its managing director for the UK regions.
Under pressure from the mayor and Bristol agents, council officers stepped up the search. High on the list of possible alternatives was the former Somerfield supermarket HQ at Park View. Sitting on a 16-acre site in Whitchurch, next to the A4174 ring road, it could have been ideal. The council occupied around 65,000 sq ft at the 250,000 sq ft building under a Co-op head lease.
“It was big enough, and there was a regeneration benefit in bringing jobs to the area, but having so many staff so far from the rest in the city centre would have been operationally difficult,” says Orrett. Park View was scratched off the list.
Next to go were two city centre sites: 65,000 sq ft occupied by the council at Brunel House, St George’s Road, and Amelia Court, Pipe Lane where the council has 35,000 sq ft. Both failed the test of efficiency: they simply were not big enough and could not easily be made bigger.
As Ned Cussens explains, it was at this point that Bristol agents made a radical suggestion. “The council had asked what was on the market, but they hadn’t asked what wasn’t on the market. They knew there were not many options, but the time had come to ask about the not obvious things,” he says.
Answering what Cussens calls “that awkward question” helped to produce a shortlist of two possible locations.
The rejected option was Lewins Place, a difficult-to-miss 106,000 sq ft block owned by a local government pension fund. Although moving here would give the property market a helpful jolt, it did not appeal because the floorplates in the 1970s block were, at 3,000-4,000 sq ft, too small.
Having rejected everything else, Aviva’s 130,000 sq ft building at 100 Temple Street was appealing – not least because it came with a 65,000 sq ft development opportunity. But it was not on the market and had only 70,000 sq ft vacant so there was no reason to suppose Aviva wanted to sell.
Council portfolio manager Peter Webb spoke to Simon Price, partner at Alder King, and he acted as a go-between. By December 2012, it began to seem like Aviva was prepared to talk about a deal.
Christmas was spent completing due diligence work on the Temple Street site and the new year began with Ferguson giving the go-ahead for detailed talks with Aviva. A deal appeared to be on.
Negotiations could have been complicated by the fact that both Aviva and the council knew the council had few alternative locations in play. Fortunately, that did not happen. Orrett says: “Aviva was very straight. We would have looked at other sites and at new-build if the talks hadn’t worked – and of course plenty of developers were desperate to talk to us about just that.”
Valued empty, as the council preferred, it might have been worth £10m. Valued fully let, as Aviva preferred, its price might have been £30m. The £18m price tag represented an inevitable compromise.
Temple Street’s existing occupiers are KPMG and Capita. Plans for the council’s occupation and timescale have not yet been revealed but Orrett says: “Two Capita leases are due to expire shortly. We will work with the two tenants to determine lease arrangements. We do not need full vacant possession in the short term and are not looking to buy any leases out.”
The 100 Temple Street deal has already given a boost to Bristol’s fledgling enterprise zone next to Temple Meads station.
In the wake of the council deal, Salmon Harvester Properties announced it was to launch speculative development at the 100,000 sq ft Two Glass Wharf site. The £35m project is a joint venture with NFU Mutual (see feature, p63).
Today, the zone already includes schemes with planning consent for 1.5m sq ft of office-led development.
David Mace, regional senior director for GVA in Bristol, says: “The Aviva deal is just what is needed. It sends out exactly the right messages about the city’s regeneration plans at Temple Quarter and Temple Meads. It will encourage others to follow suit.”
