KPMG in talks to build new HQ on site of axed £115m project

The firm has agreed a nine-month exclusivity period with Leeds City Council to explore options for delivering a new building on Criterion Place, the site of the 'Kissing Towers' scheme which was scrapped in 2008.

KPMG's lease for its current office, on Neville Street, close to Criterion Place, expires in 2015.

It said plans were at an "early stage" and it was still considering all options. If the project goes ahead, the site, which is owned by the council, will feature three buildings, including one to be occupied by KPMG.

Iain Moffatt, KPMG's Leeds office senior partner, said: "In the face of a challenging property development market we are pursuing an innovative route to meeting our future office requirements by taking on an active role of development partner.

"Though at a very early feasibility stage, our agreement with Leeds City Council is an exciting step forward in our planning towards the future of KPMG in Leeds. We are continuing to consider all options but, clearly, will be focusing on the opportunity presented by Criterion Place in the coming months."

Coun Richard Lewis, Leeds City Council executive member responsible for city development, added: "We are pleased to be working with KPMG to explore the delivery of a new office in Leeds for the firm. The council is keen to re-invigorate development in the city centre. This is an exciting development opportunity which could help fund the new proposed city centre green space on this site and boost the construction industry, bringing additional investment and jobs to the city."

The council is currently working on a draft masterplan for the site which will include three buildings, with the possibility of KPMG occupying one, and the potential for a multi-storey car park to be incorporated into one of the two remaining buildings proposed on the rest of the site.

KPMG's chosen development partner is Sovereign Leeds, which was set up this year by Mark Hancock and Mike Heydecke who have long track records in property development.

Criterion Place has been a brownfield city centre site since the demolition of the Queens Hall in 1989. It is currently used as a car park although it has offered development potential for many years.

Plans for the twin towers were first proposed in April 2004 and would have seen a 47-storey tower and a 27-storey tower next door. This would have included 301 apartments, a 161-bed hotel, retail space and car parking.

It was one of the region's first casualties of the commercial property crash. In July 2008, Simons Developments, part of the Simons Group, said the scheme was no longer viable because of current market conditions.

The company had wanted to put another scheme in its place but Leeds Council said it was very different from the original idea and therefore it had decided to terminate the contract.

The decision to scrap the scheme didn't come as a surprise to some who said it was complicated and costly. Although the original plans looked impressive, critics said it was never likely to be built to the architect's design and that the council ought to have chosen a more modest scheme by a local developer.

The council said that abandoning the scheme gave the council a chance to look again at all the options for the valuable and strategic site.

If the new plans for the site go ahead, the scheme will provide a much-needed boost for the office sector, which has felt the full force of the property downturn in 2010 as many large companies resisted moving to new offices in the uncertain economic climate.

The sector was dominated by lettings below 5,000 sq ft in 2010.

The city's property agents have been watching large companies like KPMG and law firm Walker Morris, whose lease is also due to expire soon, to drive the market forward and take the lead on moving into large new offices.

Jeff Pearey, head of the Leeds office of property agent Jones Lang LaSalle, said: "There are one or two larger requirements kicking around who are looking to reinvest in the city and take new lease and investment decisions."

Alex Munro, head of commercial agency development at the Leeds office of Knight Frank, added: "Confidence is key to progress in the office market, where companies who have survived the worst, and have conserved their assets, are now looking towards the future."