bp has unwittingly resolved a bitter property row that has been smouldering between two government bodies.

For nearly six months, Clare Short’s Department for International Development (DFID) and PACE, the government’s property adviser, have been at loggerheads over the department’s relocation plans.

PACE wanted the DFID to take over a 15-year lease at 1 Palace Street in London’s West End, which the Foreign & Commonwealth Office will vacate later this year. But the DFID was insistent that it should take over BP’s lease at Belgrave House in Buckingham Palace Road (news, 19 March).

In a move that will mean less strain on the public purse, the DFID has finally plumped for Palace Street after negotiations with BP collapsed.

The spat was triggered by an internal Treasury memo issued in March which gave the DFID autonomy over property decisions.

The DFID quickly opted to take its 3,940 sq m (150,000 sq ft) requirement to Belgrave House.

It calculated that over 30 years, it would save round £1m in rent above the Palace Street option.

PACE was understood to be ‘livid’ at this decision. It claimed that, while it would cost the DFID slightly more in rent, Palace Street offered better value for the tax payer as it would be filling a void on the government’s estate.

The DFID’s volte-face was not, however, a result of PACE’s lobbying. It is understood that BP could not do a deal with the DFID in the short timescale allowed.

The DFID is based in Land Securities’ Esso House in Victoria Street. But LandSec wants the department out of the building so it can be redeveloped.

Observers said this week that if the DFID had failed to move to Palace Street, a wider row could have ensued. ‘The National Audit Office has been pretty ruthless on the government for renting empty space. This could have been another nail in the coffin.’