Developer and Lendlease still trying to agree price on City office deal as demand for grade A space hots up

Lendlease and the developer behind a landmark office scheme in London are still trying to agree a price for the work 18 months after the firm first won the deal.

Lendlease beat Mace to the job at 120 Fleet Street in September 2022 after a see-saw battle between the pair. Multiplex also bid the job but its pitch was tailed off earlier on in the process.

Developer Chinese Estate Holdings has previously said the work will cost it £429m with the job being managed in the UK by CO-RE.

Erith finished clearing the site last year but several sources have said the project has been held up while CO-RE and Lendlease try and settle on a price. "I heard the client didn't like the number," one rival contractor said. CO-RE and Lendlease declined to comment.

Designed by Bjarke Ingels Group, the scheme will offer 540,800 sq ft of grade A office space and around 18,600 sq ft of retail space.

The job is understood to be ready to go – once a construction cost is agreed – with the amount of grade A office space in the capital now considered to be at a premium.

Once built, it will be one of the key schemes set to fill the burgeoning demand for this type of space in London.

"There is very, very strong demand for the highest quality grade A space," said Deloitte's senior advisor for real estate, Tony McCurley.

But he said the cost of speculative development in London remained high, given the rise in construction costs and the cost of finance. "The cost of finance hasn't gone down yet."

He said occupiers were wanting the best available space for several reasons including meeting ESG targets, being able to attract and retain talent and encourage staff back into the office.

But McCurley said, with several jobs completing in the next six months, there would be a shortage of grade A space from next year onwards.

He added: "We're forecasting a potential pinch point in 2025/6. If firms are looking to move in two years' time, they're now looking at a situation where there is a shortage."

Deloitte will publish its next London crane survey at the end of May and McCurley said it is likely to show a rise in refurbishment schemes with grade B space being given a makeover to upgrade it to the more sought after grade A space. He described some grade B space as "stranded assets" and admitted: "There is no depth of demand for grade B space."

Work at 120 will also include the refurbishment of the nearby Daily Express building, a grade II*-listed landmark, the former headquarters of the newspaper, and considered one of London's finest art deco buildings.

The new scheme will see the Express building turned into an art and cultural hub called the Joseph Lau Art Gallery – named after the founder of the forerunner of Chinese Estate Holdings when the firm was known as Evergo.

The 21-storey block will be known as the Evergo tower while the art hub will be "personally orchestrated" by Lau's wife and successor as chief executive Chan Hoi Wan who in an announcement in August 2022 was described by the company as "an astute and savvy investor as well as art connoisseur".

CO-RE is also working with Lendlease on the 72 Upper Ground scheme which was given planning communities secretary Michael Gove last month nearly 18 months after it was called in for a public inquiry. The job, designed by Make, has a construction price tag of around £400m.

Source; Building