Liverpool takes on Pall Mall mantle with £20.6m loan
The city council will borrow a third of the cash needed for the 111,000 sq ft office project after a previously proposed funding structure involving an institutional investor “proved challenging”.
Liverpool City Council will borrow £20.6m and crowd in other public monies with a view to having recently appointed contractor VINCI start on site in the first quarter of 2027.
In total, the first phase of Pall Mall in Liverpool’s central business district will cost £60m. The scheme, which is being developed by Kier Property, will be the city’s first new-build office development in 14 years.
Liverpool City Council will borrow £20.6m from the Public Loan Works Board, subject to securing a pre-let. Talks with potential occupiers are ongoing.
Meanwhile, £22m will come from the Liverpool City Region Combined Authority’s investment fund and some £15m has already been secured from the Ministry for Housing, Communities, and Local Government via the Strategic Futures Fund.
An additional £1.9m from Section 106 payments will be pumped into the project, according to the city council’s proposed funding structure.
The change in approach results in a shift in the project’s risk profile.
“Under the new funding structure, the council own the risk associated with project funding and building occupancy and Kier Property will retain construction risk,” according to a cabinet report.
“This shift in risk profile is reflected in a lower developer profit level than under the previous structure.”
As well as pivoting on the proposed funding structure, the city council has scrapped the idea of a 15-year rent guarantee.
The authority had planned to provide the guarantee to underpin investment value and deliver certainty for would-be investors. However, even with this, no institutional funding has been secured, which is due to “weaker investment yields applied to commercial property since the pandemic rather than other commercial considerations such as a lack of occupier demand”, according to the cabinet report.
The plan now is for the city council to invest to deliver the project before stabilising the asset and selling it on to an investor at a later date.
Plans for the project, put forward by Kier Property and CTP, were approved six years ago and proposed 400,000 sq ft of office space in total.
Liverpool City Council put the delays down to “viability issues and the post-pandemic drop in office demand, a challenge shared with most UK core cities”.
Recent efforts to get Pall Mall going have buoyed to the city’s office agents who have long bemoaned a lack of Grade A new-build office space in the city. A lack of supply has stifled demand and seen rents lag behind other regional cities at below £30/sq ft.
There are several large occupier requirements floating around the Liverpool market that new-build space at Pall Mall could provide a landing spot for, including the Rathbones requirement, understood to be around 40,000 sq ft, Arden University, and Weightmans.
So no sign of any private money going into the scheme with all the risk landing at LCC’s door?
By Anonymous
Based on the above calculations, the private sector developer is only putting in £500k of the £60m build cost but owns the investment at the end?
By Little Joe
The public sector owns it at the end.
Public sector taking early risk, and reward.
By Risk reward
So £1.9 million of S106 to provide what is in effect landscaping that would be required of the developer in any other scheme irrespective of whether it’s accessible. Do the developers who contributed S106 know that it is being spent in this way? Somehow I doubt it.
By Anonymous
How can a major city struggle so much to get investors and developers , we are not that inept are we? Other cities have them falling over themselves to chuck up high rises and office blocks.
By Anonymous
Risk Reward – Kier have an option to purchase the land, so will own the development on completion following £59.5m of public sector money being pumped into the scheme
By Del
Why start in Q1 2027? surely they could at least do the groundworks and foundations
By GetItBuilt!
How ironic the ministry for housing is putting money in, given their role in engineering the market failure via the destruction of office infrastructure that has resulted in its necessity. If eventually built, this office will sit on the same street as the still mostly empty Orleans House – previously offices – and still mostly empty Silkhouse Court. Both of which were subjected to bargain basement disfiguration in their inappropriate conversion. Both of which were well occupied as offices.
By John
there are already empty offices in this area.. why to built more?
By lt
Can the council tell us where the S106 money has come from? Is money that should have been used for schemes in poorer parts of the city urgently needing more social housing and/or improved infrastructure being diverted into the city centre?
By Anonymous
There are several large occupier requirements floating around the Liverpool market that new-build space at Pall Mall could provide a landing spot for, including…
Three occupiers who aren’t considering Pall Mall as an option
By Anonymous
What’s the point in building this when it seems half the world works from home these days, including about 85% of the council own staff.
Ludicrous that our money that should be used for services to improve the city is being used for ‘other project’s yet again.
By TaxPayer
The scheme isn’t viable without substantial public funding, so I don’t see any problem in s.106 being used for the public realm. In fact, it makes much sense.
While its a shame the grassed square has been closed off a few years, the new one would be much improved and – heaven forbid – actually used by people.
Its a smart, sensible scheme that simply needs to happen. Great news.
By Smart Sensible Scheme
I find it really embarrassing reading this report on the proposed Pall Mall office build project. Firstly LCC going cap in hand robbing Peter to pay Paul. All because they can’t fund the project through private initiatives / serious investors. Why, because they, the Investors have no faith or trust in a backward thinking LCC. Secondly, Day after day I read PNW to find projects being proposed, planning accepted and spades in the Manchester soils. Really, why is there such a huge gap in drive, ambition and delivery between the two Cities. When will it change.
By Stephen Hart
I suspect that if all partners would have grasped the nettle years this scheme could have been built and fully occupied by now.
By Anonymous
This is great news for Liverpool . The Council have really lifted their game here and thinking sensibly
By PB
At Whitehall announces the next tranche of thousands of jobs to move to it’s northern colony, the question is seriously asked as to when Liverpool will ever perform as its near neighbour. Honestly.
The billions that have been pumped into Manchester are equalled only by what has been outright denied to Liverpool. The point at which neglect becomes abuse has well and truly been crossed.
By John
@John 11:51 Maybe that’s because one city delivers and one can’t / doesn’t / won’t – take your pick. It’s our own fault that Manchester has seemingly been favoured at our expense. The reasons go back to the 90’s when Manchester displayed a grown-up attitude to dealing with the private sector whilst we decided that they’re the enemy, with the aforementioned inevitable results, and an attitude to the private sector that prevails today.
By Anonymous
at £30 psf headline rent how does this even stack up, rental growth in Liverpool offices has been shocking compared to other regional city growth.
By David T
In fairness Manchester through their political masters and senior officers through the years such as Bernstein, Boylan etc. have just made a stronger and more credible case for government funding. In fighting and petty jealousies have held Liverpool back for years.
By Anonymous