The Department for Work & Pensions is understood to have narrowed its long-running search for an office in Manchester to two city centre options; the new-build Two St Peter’s Square, and the refurbished Arkwright House.
DWP has investigated a number of properties to satisfy its 70,000 sq ft requirement over the past year. The Government office was rumoured to have chosen Manchester Royal Exchange, before pulling out to pursue a deal at Ask Real Estate’s 101 Embankment, under construction at Greengate.
However, it was then beaten to a deal by Swinton Insurance, which is in line to take all of the 165,000 sq ft building.
Now, DWP is understood to be “in dialogue” with Two St Peter’s Square developer Mosley Street Ventures and owner Deutsche Bank. Construction is due to complete by January; DWP is understood to have set a deadline to be in a new office by summer 2017.
The 160,000 sq ft building is one of the most high-end offices available in the city. Accountant EY has already agreed a pre-let on 41,000 sq ft. Quoted rent is £33/sq ft.
DWP’s second choice, Catalyst Capital’s 105,000 sq ft Arkwright House, is a refurbishment of a listed building off Deansgate, available at £26/sq ft.
Based on its requirement size and quoted rents, Arkwright House could cost an annual rent of £1.8m, while Two St Peter’s Square would reach £2.3m.
The DWP could save up to £500,000 a year of taxpayer’s money, if it chose a secondary office rather than a prime location.
However, despite the significant price difference, sources suggest that DWP is leaning towards a new-build office. The office will be a base for the roll-out of the Government’s Universal Tax Credit benefit system, and will need to support high-specification computers.
Negotiations at Two St Peter’s Square are rumoured to be focusing on the issue of break clauses; DWP needs a break at seven years to allow it to potentially move into the planned Government hub in Manchester, should the 900,000 sq ft scheme be progressed. However, Deutsche Bank is pressing for a 10-year break.
The rumour that DWP is preferring new-build offices in prime locations has caused grumbles across the property community. As one commenter said: “It doesn’t sit well with me that my taxpayer’s money would go towards paying the rent of a new building.”
DWP declined to comment.