Liverpool Builds Bright Future

Rising private sector confidence in Liverpool’s ability to become a prosperous, competitive city-region is helping to transform its retail and commercial office core, sparking a building boom without parallel in the last half century.

Cranes crowd the skyline as developers, construction companies, fund managers and public agencies step up the £2.5 billion physical and economic regeneration of the waterfront and central business and shopping districts.

Take-up levels in the city centre office market in 2005 reached a record high of nearly 500,000 sq ft (46,451 sq m), an increasing proportion of which is new-build. Rentals have also risen from £14 to £20 per sq ft over the past five years and investor demand has driven capital growth faster than any other provincial city.

“On the basis of headline rents and yields, the capital value of new office space has doubled in that period,” enthuses Jim Gill, Chief Executive of Liverpool Vision, the Urban Regeneration Company (URC) charged with coordinating the city centre’s recovery. Property consultants GVA Grimley report that Liverpool has outstripped other UK cities in rental growth and expects 1.15 million sq ft(106,838 sq m) of new or refurbished space to come to market in the next four years with demand matching supply.

STRATEGIC LEADERSHIP

Much of the restored confidence, suggests Gill, stems from Liverpool’s Vision’s broader planning strategy for the central business district. “Five years ago Liverpool was just not on the investment radar for national developers or institutional investors. Now they are taking advantage of the opportunities being offered.”

Liverpool Vision was the first URC to be established by the government in 1999 in its quest for strategic leadership and bette rintegration of resources to bring about an urban renaissance. The company’s public sector funding partners are Liverpool City Council, the Northwest Regional Development Agency (NWDA) and English Partnerships. The NWDA contribution to Vision’s three-year rolling business plan will peak at £31 million in the current financial year.

Commercial development is now much less dependent on public gap funding. Grosvenor Estates forged ahead with its £920 million Liverpool One retail and associated leisure and residential development without any public funding. The 1.6 million sq ft (148,644 sq m) scheme, which is due to open in Spring 2008,will double the city’s existing retail area. Grosvenor’s willingness to invest, says Gill, has been influenced by the URC’s broader plan for the city centre and the commitment of Vision’s partners to seeing the regeneration plan through to completion. “Grosvenor are long-terms investors – they can see Liverpool has a long-term future.”

Gill and his team are particularly pleased with the progress being made to reshape the city’s commercial district, again with diminishing pump-prime funding from public sector partners.

In 2001 Liverpool Vision devised a three phase strategy to kick-start speculative office development, then to create a new expanded commercial district in the area bounded by Old Hall Street and Pall Mall, to the north of the city’s traditional commercial area. Low rental levels had provided little or no incentive to invest in speculative schemes and the existing stock gave only limited opportunities to revitalise the market.

Support was pledged for three stand-alone schemes totalling 425,000 sq ft (39,483 sq m);the Beetham development at 101 Old Hall Street (let to Unisys and the Passport Office), Shepborough Developments’ City Square project (let to the Department of Constitutional Affairs) and Rumford Investments’ Unity scheme in Chapel Street, which announced its first letting to Ernst & Young in December 2006.

Occupier response has been such that the grant aid for the first two schemes has either be repaid in full or was never taken up. The Unity development, which required £10 million of public funding (£5 million from the NWDA), largely because of adverse ground conditions, was completed in November 2006.

Gill is bullish about the market’s performance. “We have not seen this level of commercial development in Liverpool for over50 years. There is a pent-up demand from professional firms wanting to consolidate in quality space and boost their growth potential.”

VIABLE FUTURE

The main occupiers, developers and investors in the new commercial district are demonstrating their commitment to the area by creating the Liverpool Commercial District Partnership. Working with Liverpool Vision and other public agencies, the partnership will work on improving the management and marketing of the area.

“They are taking responsibility for the future well-being of the area because they believe it has a viable future – five years ago that would never have happened,” explains Gill. Rising residential values are another rmeasure of how far the city has progressed. All the £150 million funding for the Arena and Convention Centre at Kings Waterfront is coming from the public sector but a third o rmore of that is expected to be recouped from residential, commercial and leisure development of the rest of the site.

The first phase residential development, a joint venture scheme by David McLean and City Lofts is due on site in March. Hotel development for Jury’s Inn and Stalybridge Suites will be completed by Spring 2008.

Gill argues that the regeneration of the city centre waterfront, and the retail and commercial expansion are merely helping Liverpool to catch up with los opportunity brought about by 40 years of economic stagnation.

Liverpool Vision will shape more of its future programme, he says, around the fundamentals of wealth and job creation with the likely focus shifting towards the areas around the two universities, Hope Street and the fast developing Baltic ‘independent’ district.

Together with other Liverpool agencies – Liverpool Land Development Company and Business Liverpool – Liverpool Vision is working with the City Council on proposals for a new, single economic regeneration company yto drive the pace of change in the city even faster. It is expected to be operational by April 2008.

“The debate now is how we rack up performance, how we structure an organisation to meet these challenges. Each o fthe partners is signed up for change and we will have a much clearer idea of where we are going by the end of the financial year.”