The Department for Education has signed up for another 15 years at Blackstone’s Sanctuary Buildings, SW1, casting doubt over the department’s suggested move to the Old Admiralty Building, also SW1.
The DfE’s relocation was expected to save the taxpayer £19m a year. Its new lease at the Sanctuary Buildings is understood to be at an increased annual rent of more than £50 per sq ft.
The deal also means that Blackstone will not now be carrying out its plans to revamp the building, for which it achieved planning approval last summer.
Space addition
The Buckley Gray Yeoman designs would have increased the space from 225,000 sq ft to 261,000 sq ft with the addition of another floor, the introduction of terraces, as well as a revamp of the atrium and ground floor.
Blackstone bought the 227,000 sq ft office block in Victoria from Tishman Speyer in 2014 for £175m – representing a circa 5.6% yield – when the DfE had only around three years left on its lease.
The private equity giant has been steadily divesting itself of its London office assets, which it built up between 2012 and 2015. Its most recent sale was that of the Adelphi building for £550m.
Sanctuary Buildings is not currently up for sale, but based on a yield of 4.5% now that it has been regeared, it could be valued at close to £300m.
Updated strategy
Last month the government updated its property estate strategy targeting £3.6bn in savings over the next 20 years.
This includes reducing the total number of its office buildings from 800 to fewer than 200 by 2030.
The previous efficiency strategy set out in 2014 aimed to raise £5bn by 2020. So far, only £2bn has been accrued from the sale of more than a thousand buildings.
The 247,570 sq ft Old Admiralty Building had been undergoing a £50m refurbishment prior to the DfE’s arrival.
Blackstone declined to comment. The DfE and Government Property Agency has been contacted for comment.
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