Apple Mulls Lease Extensions to Avoid Battersea Delays
Apple Mulls Lease Extensions to Avoid Battersea Delays
Apple is reportedly in early-stage talks to extend its existing UK leases in the event that the construction of its planned, new British headquarters at Battersea Power Station is delayed.
According to media reports, the US tech company is making contingency plans to secure longer leases at its current UK offices or find potential temporary locations, on the off chance that construction of its new Battersea Power Station HQ is not completed on deadline for December 2020.
Apple is set to be the anchor tenant of the redeveloped, 42-acre site, which is currently being developed into a mix of residential, commercial and office spaces after closing as a power station in 1983. An 80% stake in the grade II* listed property was acquired along with a surrounding plot in 2012 by a Malaysian consortium for £1.6bn, with a further £1bn committed toward the construction costs.
Apple then agreed a lease for all 500,000 square feet of office space at the site – comprising 40% of the property’s total 1,250,000 square feet – in 2016. The 15-16 year lease grants Apple six floors of office space in the former power station, which will serve as a new ‘Apple Campus’ HQ for the tech firm’s workforce of 1,400 London staff who currently operate at eight separate sites across the English capital.
Reports state that Apple will enjoy the first three years of tenancy rent-free, after which total rent for the lease length will be charged at an estimated cost of £40-£45 per square foot.
Battersea developers “very confident” of timely completion
Some observers speculate that Apple’s reported enquiries point to future commercial tenants’ lack of faith in Battersea’s redevelopment schedule.
Property experts, however, have affirmed that the measures are simply reasonable precautions which any large company would be expected to take in order to guard against the business costs of potential delays to the new site’s construction.
Simon Murphy, chief executive of the Battersea Power Station Development Company, (BPSDC) has expressed confidence that the new office will be delivered on track with its current deadline of December 2020, stating:
“We’ll give them [Apple] that building at the end of 2020….everyone is very confident about [that] at this stage . . . and then you’ll probably see Apple coming in some time after. Their fit-out is a big job.”
A spokesperson for Apple echoed Mr. Murphy’s sentiments, stating that the company was “looking forward to opening [its] new London campus at The Battersea Power Station in 2021.”
Battersea loses 20% of residential tenants due to delays
While BPSDC leaders remain positive about the coming deadline for delivery of office space, they have nonetheless recently conceded delays to the completion of the site’s residential developments.
Mr Murphy confirmed “absolutely” in September that the developers were “a number of months delayed” in construction of the apartments, elaborating:
“We told everyone what the situation was, we offered them the chance to stay or go, and I’m delighted that 80 percent have said they will stay.”
Approximately 4,330 apartments are set to be built in newly constructed complexes next to the power station. However, costs have been an issue for the development, with expenditure doubling from £740m to £1.5bn in phase two of construction. Analysts attribute this to complications associated with the building’s grade II* listed status.
Last year, Wandsworth Council voted to approve an alteration to BPSDC’s obligations under the terms of its section 106 agreement – under which the council can demand certain concessions in order to allow for an otherwise objectionable site to be developed.
In changing the s.106 agreement terms, the council reduced BDSDC’s legal obligation to incorporate affordable housing into its residential constructions by 250 homes – from 636 to 286 apartments. The overall expense to deliver all phases of the redevelopment project is estimated at £9bn.
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