The new owners of the Lloyd’s Building are facing the prospect of losing their blue chip tenant after it emerged that Lloyd’s of London may quit the property due to rising maintenance costs.
The insurance institution has been the sole tenant of the eponymous building since it opened in 1986 and has occupied successive HQs on the site since the original Lloyd’s Building opened in the City in 1928.
Last week we reported that the current building had been sold by German asset managers Commerz Real to Chinese insurance group Ping An. The sale was seen as a significant transaction illustrating the growing dominance of Asian investors in the London commercial property market.
Now architect Richard Rogers’ famous ‘inside-out’ design is being blamed for its high maintenance costs and Lloyd’s is seriously considering leaving the building when the next break clause in the lease comes up in 2021. If this happens Ping An will be saddled with the cost of maintaining, what the Evening Standard describes as, a “virtually unlettable Grade I listed building.”
The Lloyd’s Building is a landmark structure, similar in design to Rogers’ earlier Pompidou Centre, in that its services – such as piping and lifts – are on the outside maximising the space of the interior. It has been widely recognised as one of the most important buildings of modern times and is the youngest ever to have received Grade I listed status.
However it has been no secret that Lloyd’s has been unhappy with the 290 ft tower for some time and now chief executive Michael Ward has spoken out about the difficulties it poses for tenants.
“I can’t guarantee you’ll get to the ground floor in the lifts because they break down with some frequency.
“There is a fundamental problem with this building. Everything is exposed to the elements and it makes it very costly,” he told Reuters.
He continued to make it clear that Lloyd’s is serious about its threat to end its tenancy at the earliest opportunity.
“Of course we’d move. To say never to anything would be absolutely daft. We have breaks in the lease, and any sensible person would look at what their options are,” he warned.
It appears that the maintenance issues may have been one of the reasons it took Commerz Real two years to sell the property. It may also have had an impact on the price, as it has been estimated that a ‘problem free’ Lloyds Building would have been worth £320 million rather than the £260 million Ping An paid.
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