NW 2015: Take a long view
Projects are returning to funder's desks in leaner shape just as European backing is about to be cut under new rules, writes Mark Bousfield, investment manager at the Chrysalis Fund.
Merseyside's commercial property development market will enter a new phase in 2015. I have picked out three trends, two positive and one negative, that will influence how and why new property is delivered.
The first positive is the coming on stream of several major economic assets: the Exhibition Centre extension on King's Dock, the 54 cruise ships through the city terminal and Liverpool2 in Seaforth. These are key events for 2015 because the visitor economy and port trade are two ways that this city region intends to earn its living in the long run. These projects represent a down-payment of at least £200m on that long-term plan, and will create demand for downstream investment. What will the industrial market look like with post-Panamax ships on the Mersey?
The second positive is the return of pre-crisis schemes: less frothy, more affordable and economically more viable. The Chrysalis Fund's pipeline – we fund schemes that create office and industrial space – is fed by both its private sector managers and its public sector stakeholders. So we see almost every commercial development in the region and can compare their pre- and post-crisis incarnations. The good news is that the revised schemes – minus a tower here and a bandstand there – are returning in a leaner format. I am excited to see what comes forward on Liverpool and Wirral Waters, in the Knowledge Quarter (the Materials Innovation Factory is a future highlight) and from the ambitious Baltic Creative.
Below the surface, however, there's a perilous undercurrent. 2015 marks the end of the current ERDF programme and the beginning of the new one. Projects that have secured grant funding under the current programme are pressed to use their allocation in time, or risk having it de-committed. Judicial review notwithstanding, the ERDF grant allocation for new developments will be roughly halved. I can think of three projects right now that have proceeded under the current programme but might fall short under the next one, when competition for gap funding will intensify.
What does this mean for commercial developments? It means finding innovative funding strategies, linking asset owners with cash providers, sharing risks and making partnerships. There are alternative sources of grant funding like Business Premises Renovation Allowance, the scheme responsible for so many of our city's apart-hotels, or Heritage Lottery Funding, but these will not replace straightforward grant, and I believe peripheral schemes will fall away.
The Chrysalis Fund is prepared to put its money where its mouth is. We've funded new headquarters for a local shipping company, logistics space set to benefit from port trade and the Exhibition Centre extension itself, amongst others. We've put together cocktails of public and private funding to take viable projects forward – five funding sources in one project and counting. We are here to take risks but the risks we'll most want to take in 2015 are on projects that are aligned with the city region's long-term vision of economic success, and that will bring a can-do approach to funding in the low-grant world.
The Chrysalis Fund was launched in March 2012 and is backed by the European Investment Bank, the Homes & Communities Agency and European Regional Development Fund under the JESSICA (Joint European Support for Sustainable Investment in City Areas) programme. The fund is managed by the Igloo Consortium, which is made up of Igloo Regeneration Limited, GVA and RBC Capital Markets and operates in partnership with the Liverpool City Region LEP and the local authorities.