Deputy City Editor
The beleaguered commercial property market received a welcome boost yesterday with the announcement by recently floated Argent that it had pre-let a 75,000 square foot office building to Lloyds Bank at its fast-growing Brindleyplace development in Birmingham.
The agreement for Lloyds Bank to take the space when the building is completed follows an equally high-profile pre-let to BT last year on a larger, 120,000 square foot building. The two deals confirm the success of one of the largest mixed-use schemes in the country, seen as Birmingham's answer to London's Broadgate and Canary Wharf developments.
In keeping with the Government's recent policy shift away from single- use property developments, Brindleyplace plans to leaven more than 1 million square feet of offices with 143 homes, shops, restaurants and a theatre. The completed project is expected to be worth more than pounds 300m.
The pre-let provides hope that rental values, which fell sharply during the recession, were starting to rise again. A rally last year in the sector's share prices was premised on an apparent rise in rents which, however, petered out except in a small number of popular areas such as London's West End.
Lloyds is thought to be paying about 25 per cent more per square foot than the pounds 15.75 BT agreed with Argent last year. It is tied into a 25- year lease on the building.
The deal with Lloyds strengthens Brindleyplace's position as one of the most attractive commercial property developments in the UK and vindicates Argent's gamble in rescuing the project two years ago after its original developer, Godfrey Bradman's Rosehaugh, fell into receivership.
Argent paid just pounds 3m in July 1993 for the 17-acre site, which was later revalued at almost pounds 27m. More than 10 acres of the scheme are now under construction or already finished.
Brindleyplace has been welcomed in Birmingham, where it is a symbol of the city's attempts to reinvent its scarred centre.
Argent's deal with Lloyds comes against a backdrop of still-falling rents in the market as a whole and lower capital values. Cluttons, the surveyor, estimates that rents are 0.7 per cent lower than a year ago and property values 3.6 per cent down. The firm sees a widening gulf between prime and secondary property across all sectors. Argent's shares, which came to the market at 255p, closed 7p higher at 310p.