AEW Europe has made its Manchester development debut by exchanging contracts to buy one of the most prestigious development opportunities in the city for £31.7m.
The investment manager has topped a list of international private equity and UK propcos to buy 101 Barbirolli Square.
PwC and DLA Piper will vacate the 83,700 sq ft block in 2017, at which point AEW will upgrade, refurbish and extend the block.
The price reflects a yield of a 6.4%. It was sold by Aberdeen Asset Management. Scottish Widows Investment Partnership bought the property in July 2011 from Hermes.
Barbirolli Square, which is adjacent to the Manchester Conference Centre, was the most sought-after address in the city when it was built in the 1990s. The neighbouring 100 Barbirolli Square is also being targeted by developers keen to lead the rejuvenation of the area.
SWIP sold the 140,000 sq ft number 100 in July 2013 for £41m to Moorfield Group and Oaktree Capital Management.
Tenants including PwC, EY, DLA, and Addleshaw Goddard occupied the two blocks, but have now arranged moves to new-build options at 1 Spinningfields and 1 and 2 St Peter’s Square.
Aberdeen conceived its own refurbishment scheme in 2014 once it became clear DLA Piper would vacate, but this was scrapped in favour of a sale, with CBRE instructed in May to seek £25m for the block.
JLL capital markets director James Porteous said overseas demand for Manchester capital had compressed prime yields by 100 basis points over the past year – a trend set to continue over the next half decade.
The sale is also a fillip to the city’s office market, which has been muted since a bumper 2014 and Q1 2015 depleted available stock.
