The freehold interest in 1 John Street, a new headquarters building for Lloyds Bank in Cardiff city centre, has been sold in one of the largest office investment deals outside London this year. Pembrokeshire-based Second Horizon acquired the 115,000 sq ft property from its developer, Cardiff-based JR Smart.
The 10-storey building, which is entirely let to Lloyds, has capacity for 2,500 bank staff. Lloyds took occupancy earlier this month under a 10-year lease. The bank said staff assigned to the new office will be expected to spend around 40% of their working time there, with roles ranging from consumer lending and customer service to insurance and pensions teams.
Deal details and financing
The investment was marketed by property advisory firm Knight Frank with an asking price of £38.4m. Handelsbanken provided funding for the purchase, with legal advice from Hugh James. The vendor and buyer were represented by Robertsons Solicitors and JCP Solicitors respectively.
David Marshall, head of real estate finance at Hugh James, led on the purchase, supported by Iwan Jenkins, a partner in the firm’s construction team. Marshall said: “We are very happy to have acted for Handelsbanken on another significant deal for the funding of the purchase of JR Smart’s recently completed scheme at John Street in Cardiff.” He added: “It was great to be part of a truly Welsh deal, with a Welsh developer and seller, a Welsh purchaser, three Welsh law firms and other local advisers.”
Market reaction and context
Gareth Lloyd, partner at Knight Frank Cardiff, said: “The sale of 1 John Street demonstrates the strength and attractiveness of Cardiff’s office market to investors. The asset is best-in-class from every perspective, with a strong covenant in a blue-chip occupier.” He noted that Cardiff is “fast becoming one of the most compelling in the UK from an investment perspective, with resilient demand for well-specified space, a growing pool of ambitious occupiers, and strong rental growth potential.”
The new hybrid working operation has brought together Lloyds staff from its former Newport office and those based at St William House, a 144,000 sq ft building. Earlier this year, St William House was acquired from its owner, Schroders, by Cardiff and Vale College.
Wider impact on Cardiff's office market
JR Smart built 1 John Street speculatively. The grade A office building is close to the Capital Square office-to-residential scheme, which JR Smart successfully developed. It is the last speculative grade A office scheme to be built in Cardiff since completion of the office element of the interchange scheme at Capital Square, now the Welsh headquarters of L&G.
The city currently lacks a pipeline of new grade A office buildings needed to attract new investment and provide space for indigenous firms to grow. With high interest rates and construction costs, any new development would need tenants willing to pay rents potentially well north of £40 per sq ft to be commercially viable. The current headline rent for the city is £33.50 per sq ft. To complete its John Street project, JR Smart secured a £15m repayable loan from the Cardiff Capital Region’s Strategic Premises Fund.
