Partners Group, the Zug, Switzerland-based private markets investment firm, and Exemplar, the London-based property developer, have teamed up to construct a 14-story office building in the City of London.
The building, at 80 Fenchurch Street, will comprise around 240,000 square feet of Grade A office accommodation and 12,250 square feet of retail space.
The project, which remains majority-owned by funds either managed or advised by Partners Group, will also see the creation of six roof terraces and floorplates ranging from 5,000-20,000 square feet.
The demolition of existing buildings on the 0.6-acre island site has now been completed. Construction of the new building will begin in the second half of 2017 and is scheduled to be completed in 2019.
Partners Group said it would be the first occupier at 80 Fenchurch Street, relocating its UK office there from the Heron Tower.
According to data from BNP Paribas, take up in the City of London slowed slightly over Q1 this year, standing at 1.34 million square feet, down from 1.59 million square feet in Q1 2016. However, despite a rise in the City of London’s vacancy rate in Q1 to 6.35 percent, it is still below the long-term average, the data said.
BNP Paribas also said that UK GDP growth has been revised upwards and is expected to reach 1.8 percent, with Central London driving this increase at 2.2 percent growth. The firm said this was reflected in three major lettings of 100,000 square feet or more by law firm Freshfields, engineering outfit Arup and travel agent Expedia.
But Mike Bryant, managing director of private real estate at Partners Group, said he felt the asset’s location would help attract a variety of tenants.
“We have got a great product in a great city. Its location means we can look in one of two directions in terms of occupiers. It is on the doorstep of the insurance market, based in EC3, and it is close to Aldgate and the tech belt that sits around that area, where there is a lot of infrastructure underway. So we think, long term, the location is getting better,” said Bryant.
“Clearly, there is a lot of short-term noise at the moment, but we believe in the long term and we think the location of the asset will appeal to a broad occupier base. We have a good pipeline of prospective tenants, including Partners Group, and we will lease at the time we think we can get the best commercial deal.”
Bryant said his firm had secured discretionary capital from a group of institutional investors, which constituted the equity aspect of the project, and was in advance discussions to secure a debt facility from a third party.
A spokesman for Partners Group said the firm would not be commenting on potential returns until the project is built, leased and sold. “We've always been clear that we wanted to build, and we are still on plan,” he said. “We believe that this decision will deliver attractive returns for our clients.”