A developer has been given eight months to find more occupiers to fill a mostly empty £20 million office tower in Sheffield city centre - amid fears the council may have to buy the building.
3 St Paul’s Place, close to the Peace Gardens on the corner of Charles Street and Norfolk Street, officially opened last year, offering 78,000 sq ft of Grade A office space over 10 floors.
The first speculative office building in Sheffield since the recession, it was the sixth and final element of the £200 million Heart of the City project, which includes the Mercure Hotel, St Paul’s City Lofts - a 32-storey tower - and the Cheesegrater car park.
However, further tenants are needed. The top two floors are let to engineering consultancy Arup, and Swedish bank Handelsbanken took 3,500 sq ft late last year.
There was little interest from mainstream funders to support the scheme in 2010. The council helped to apply for money from a ‘basket’ of lenders, and agreed to underwrite costs if no tenants could be found for the building, which was started without any occupiers signed up.
In 2013 Sheffield Council agreed with the developer, CTP, to purchase the offices one year after completion, unless the company decided to keep the property or sell it on at a higher price.
Now the authority’s leader, Coun Julie Dore, has signed off an extension of the deadline, giving CTP until March next year to secure further tenants.
A report to Coun Dore said: “Hopefully this will lead to the desired situation, whereby the property is sold on the open market without the need for further intervention by the council.
“If the property can be sold by CTP to a third party that will achieve the aim of demonstrating that the Sheffield office market is functioning and attractive to private investors.”
The report said the council could have refused to grant the extension, and buy the property immediately, adding: “It could then manage the property and try to find additional tenants, before either selling it on the open market in future or holding it as a long-term investment.”
However, Coun Dore was told: “This is clearly a very considerable amount of money to borrow at a time when the council’s financial pressures are already quite severe. To acquire the property would incur further holding costs and expose the council to significant financial, and potentially reputational, risk.
“Management and letting of a property of this nature is likely to require external property and legal support.”
Officers had ‘resisted requests from CTP for further financial concessions’, while the agreed deal was ‘the best that can be negotiated’, the report said.
Finance for the scheme came via Barclays, a European Regional Development Fund loan and a JESSICA infrastructure loan from the Local Enterprise Partnership.
Earlier this year David Topham, managing director of CTP, said there were ‘a number of deals in the pipeline’ with potential occupiers, but blamed the ‘mood of uncertainty after the Brexit vote’ for a lack of take-up of office space across the North.
Meanwhile more Grade A office developments are on the way in Sheffield. Acero, a £20m office block on the Digital Campus near the railway station, has just opened and the completion of Steel City House - a revamp of the old DWP offices off West Street - is imminent.