Sainsbury checks out of Holborn HQ

The supermarkets chain has been under pressure to find cheaper premises for some time, with the City irritated that staff enjoyed plush offices while more successful rivals, such as Tesco, had less-expensive HQs out of town.

The move will also allow the business to operate from a "greener" building when it relocates about 2000 staff in early 2011. Sainsbury's took out a lease on the glass-fronted Holborn site in 2001 under then chief executive Sir Peter Davis, outbidding moneybags investment bank Goldman Sachs in the process. The offices cost about £45 million to refurbish.

The decision to move to King's Cross comes at the most sensitive period in the company's 138-year history. Sainsbury's board indicated two weeks ago that it is ready to recommend a 600p-a-share takeover bid from Delta Two, an investment fund owned by the Qatari royal family. Sainsbury's has agreed terms with King's Cross Central developer Argent for new offices, and is in talks to secure extra space so it can also build a supermarket at the site.

The company pays about £16 million a year rent for its 330,000 square feet offices at Holborn. It is looking to sell on the lease, and expects to get plenty of offers.

Justin King, the chief executive credited with turning the business around after several tough years, said: "We are pleased to be part of this new development and the regeneration of this area, and were attracted to the site as its outstanding environmental credentials support our aim to reduce energy use across our business."

The King's Cross Central development is a joint venture between Argent, London & Continental Railways and DHL Exel. The venture was granted planning permission in December 2006.

The 67-acre brownfield site is attracting interest from many businesses because of its transport links. Guardian News & Media ismoving there from its headquarters on Farringdon Road, where it has been since 1976.

Plans for the regeneration of the site include 1900 homes, 50 new buildings and the refurbishment of 20 historic ones. King's Cross Central is said to boast energy-efficient technology and use renewable energy sources such as wind turbines and solar panels.

The Qataris have been at pains to stress that they back management, and are thought to be supportive of this decision. Delta is in talks with the trustees of the staff pension fund, who are seeking reassurances about longterm plans for the company.

Sainsbury's has a trading update next Wednesday that will be closely watched. Citigroup said in a note today: " Sainsbury is unlikely to have escaped this slowdown over the summer and, with food inflation at a peak, we are not overly optimistic on trading for the next few quarters."