(Updates with British Land’s rental income from Broadgate in 10th paragraph.)
June 7 (Bloomberg) -- Plans by the owners of Broadgate Square, the City of London’s largest office complex, to knock down two buildings to create a new U.K. headquarters for UBS AG may be derailed by historical preservation efforts, worsening a shortage of new space in the capital’s main financial district.
English Heritage, a state-funded conservation group, recommended on June 3 that Broadgate should be given the second- highest level of protection from demolition. The government will decide whether to accept the advice within five weeks, a spokeswoman for the Department for Culture, Media and Sport said yesterday. British Land Co. and Blackstone Group LP each own 50 percent of Broadgate.
Giving the complex a Grade 2 listing would “raise the question of where to locate 7,000 permanent banking jobs and put at risk more than 5,000 construction jobs,” British Land said in response to English Heritage’s recommendation. UBS declined to comment.
The proposal to redevelop part of Broadgate, at a cost of 850 million pounds ($1.4 billion), for Switzerland’s biggest bank was approved by city planners in April. A new building at 5 Broadgate would have about 700,000 square feet (65,000 square meters) of space, making it British Land’s biggest project.
U.K. developers have revived office projects in central London in the past year, after putting them on hold as demand and funding evaporated in 2008, to take advantage of rising rents. Even so, the amount of new office space completed in the City of London next year may be the lowest on record, Drivers Jonas Deloitte said May 3.
British Land, the U.K.’s second-largest real estate investment trust, may make a development profit of as much as 90 million pounds from the project, according to Harm Meijer, an analyst at JPMorgan Chase & Co. in London. The property company declined to comment on the estimate.
“The development is a very important part of the company’s portfolio,” said John Cahill, an analyst at Evolution Securities Ltd. in London with a “neutral” rating on the stock.
Broadgate was built next to Liverpool Street Station in the mid-1980s and includes office buildings, stores, restaurants and an ice-skating rink. About 30,000 people work in the complex’s 4.4 million square feet (408,773 square meters) of space for companies including UBS, the largest tenant, and Royal Bank of Scotland Group Plc, according to the REIT’s website.
A listed building cannot be demolished, extended or altered without government planning guidance, according to English Heritage’s website. Grade 2 properties, defined by the organization as “particularly important buildings of more than special interest,” make up 5.5 percent of all listed structures.
British Land gets annual rental income of 86 million pounds from Broadgate, according to the company’s last annual results. That’s about 16 percent of the total.
Broadgate Square is “one of the most important and successful developments of its period and type, possessing special architectural and historic interest,” English Heritage said last week.
“As a message to the international business community, it’s not a very positive one,” City of London spokesman James Abbott said by telephone. “On the one hand we’re saying Britain is open for business and at the same time we’re saying that we can’t meet your business needs.”
--With reporting by Thomas Penny in London. Editors: Andrew Blackman, Ross Larsen.
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