INSURANCE giant Legal & General has paid é86m for a Deansgate office block, as the city's red hot property investment market ends a record year.

The Legal & General Linked Life Fund has acquired the long leasehold interest in 2 Hardman Street, part of the Spinningfield office development, from developers Allied London Properties.

The 157,000 sq ft property was completed in April, 2006, and is fully let to Greater Manchester Newspapers Ltd, publishers of the Manchester Evening News, and to accountants Deloitte & Touche.

The building was due to have changed hands in June as part of a deal with investment house Matrix, but the deal collapsed, and 2 Hardman Street remained unsold.

After the collapse of the deal, Morley Fund Management acquired two neighbouring buildings at Hardman Street for é140m, reflecting a net initial yield of 4.75 per cent.

The deal at 2 Hardman Street is understood to show a similar yield.

Trevor Nelson, property fund manager of Legal & General's Linked Life Fund said: "We believe that this opportunity provides genuine prospects for future rental growth.

"The fund has seen substantial growth in 2006 and this is part of our on-going office acquisition strategy."

Expansion

" We view Spinningfields as an exciting expansion of the Manchester business district, which will provide excellent prospects for future rental growth, due to the continued success of Spinningfields and the prime nature of the building, and are delighted to have made this significant investment in the scheme." Many big London pension funds and insurers are increasing the amount of money they invest in commercial property, growing the value of their property portfolios from around 7 per cent to as much as 15 per cent.

In the course of the last four years, central Manchester has been the beneficiary of the funds' increased spending on commercial property.

It is estimated that around é1bn was spent on commercial property in Manchester in the last year.

In a separate move, Legal & General sold the Wilmslow Business Park to Rok Developments for é10m. It is Rok's largest buy so far in the north west. The deal brings the total development pipeline for Rok Development in the north west to more than é100m.

The 34-acre park has planning permission for four new buildings, totally over 200,000 sq ft. With the exception of Stamford Lodge, the former home of brewer Henry Boddington, the existing buildings on the site will be demolished.

The first phase of new building work will start on site in 2007, and the historic Stamford Lodge will be refurbished.

Stuart Longbottom, of Rok Development Manchester said: "Demand in the region for high quality office and industrial accommodation continues to be high, and our proposals for Wilmslow will offer flexible solutions for businesses looking for a variety of unit sizes, with the option to let or indeed buy their own property."

On the Hardman Street deal, Legal & General were represented by King Sturge and Allied London Properties by Dunlop Haywards & Jones Lang LaSalle.

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