A Merseyside council has revealed it is in advanced talks with a potential tenant to help fill an empty office block which has cost it millions. This comes at a key time for the borough among ongoing budget issues and a warning costs could rise more.
An update has been given by Wirral Council over its £75m offices that were built in Alice Ker Square in Birkenhead. One building, Mallory, is currently part occupied by the local authority while Irvine currently sits completely empty.
The offices, referred to as the Birkenhead Commercial District (BCD), were forward funded by Canada Life Ltd with the local authority then expected to pay that back over 35 years. The buildings were finished in 2023 and when the plans were approved, the council expected to make money by renting the buildings out.
No new tenants have been announced since the council moved in. To cover the costs, millions of pounds of profits from the Wirral Growth Company, a council joint venture, have been used with £1m diverted to cover extra costs earlier this year.
However the council has now revealed it is in advanced talks with a potential occupier of the Irvine building. This would see much needed rental income to offset the ongoing costs of the offices.
This is especially important as the current arrangement the council has for the two buildings means the investor, in this case Canada Life, "benefits from rent increases aligned to an agreed index (typically CPI), whereas the Council in leasing the asset is dependent on what terms it can agree in the open property market." CPI or the Consumer Prices Index measures the average change in prices for typical goods and services.
A report before senior councillors on a December 17 committee said: "The curve of how rental growth and indices change over time is different and therefore towards the end of any transaction like this there is a risk that more rent is paid out than is received."
At the meeting, councillors are being asked to give permission for interim chief executive Matthew Bennett to negotiate and finalise the grant of a sub lease to a potential occupier.
The report said: "The council is at an advanced stage in discussions regard letting the BCD. It is likely that it will need to be in a position to be able to agree terms as these progress to the latter stages of those discussions."
Despite the costs of the offices, the council said they will bring more people into Birkenhead and the move saved money on buildings leased such as the Cheshire Lines Building.
Officers said: "This has generated an asset which is unique and exceptional in the local market, offering very high-quality bulk office space situated within easy reach of the amenities of a town centre. At the time of construction and now the two buildings are, with few exceptions, the best new office spaces on the market in the North West of England."
Wirral Council leader Cllr Paula Basnett, said: "This is momentous news for Birkenhead and the town centre and a real vote of confidence in its future," adding a major company "is keen on moving there it will undoubtedly have a huge impact."
She added: "Not only is this a massive boost for the town but the prospect of bringing many more workers and the resultant increase in footfall will be hugely significant for local traders, as well as the income from the rent to help support frontline council services.
"It is still early days and clearly there are still some very practical steps we need to take, but when we are able to make further announcements we will do so."
