Work is expected to start on site in November at Two New Bailey Square as the final legal details are worked out on Salford City Council’s deals to kickstart development on its key commercial sites.
News emerged this summer that the council was preparing to forward-fund development at 100 Embankment and underwrite the next office block at English Cities Fund’s New Bailey with a combined £200m investment over 25 years.
The investment plan is in line with the recent trend towards councils accessing cheap borrowing to invest in property, as seen in Warrington Council’s £200m purchase of Birchwood and Trafford’s recently announced investment strategy. Being within the city boundaries, it is also clear of the crackdown that Government has this week initiated on investments outside of councils’ respective jurisdictions.
The council previously took an underlying lease at 101 Embankment, guaranteeing income on 50% of the space for the first 10 years. The whole 165,000 sq ft building was let in full to Swinton Insurance before construction was completed and was subsequently sold this summer, with M&G Real Estate paying £105m at a yield of 5.3%.
A similar arrangement, but over 25 years, will take place at Two New Bailey Square, which is billed as an 188,500 sq ft office building with floorplates just shy of 18,000 sq ft. A contractor is expected to be announced soon.
The first commercial building at the scheme, One New Bailey, is now largely occupied by law firm Freshfields Bruckhaus Deringer. With wealth management business WH Ireland occupying 6,600 sq ft, there are only one-and-a-half floors of office space left, totalling around 25,000 sq ft.
At Embankment, Salford is to invest directly in the 164,000 sq ft 100 building, buoyed by the success of its neighbour. The council could exit the project in a similarly profitable way, or maximise rental income over the long term.
The development partners at Embankment are Ask Real Estate, Ask’s parent group Carillion and Tristan Capital Partners. Both 100 Embankment and Two New Bailey Square secured planning consent last year.