A multi-million pound project to convert a Liverpool office building into an apartment complex will go before councillors a second time – but viability concerns remain. Tony McDonough reports
Councillors in Liverpool will look again this week at a multi-million pound plan to convert a city centre office building into an apartment complex.
In early June the city’s planning committee refused the application for the conversion of the 27,000 sq ft Centric House despite officers recommending approval. Manchester-based CERT Property acquired the building in 2018, paying £3.3m.
Concerns centre around the viability of the scheme. An independent report submitted with the application said the scheme could not afford to offer any ‘affordable’ units (rent or sale prices no more than 80% of local market rates).
It also said it would not be able to offer the council an S106 contribution. This refers to money paid by developers towards improvement of local amenities or the local environment.
And the report added that even without these obligations the scheme still struggles for financial viability. This depends on an anticipated developer profit of 13% when construction costs are adjusted down by 5% and sales values are adjusted up by 5%.
This is lower than the nationally accepted minimum target of 15% – the lowest figure allowed in the viability guidance when piecemeal disposals are being considered, as is the case here.
The notes to the planning committee add: “The financial appraisal has been independently assessed by the council’s qualified independent viability consultant.
“This has confirmed that, given the benchmark land values, build costs and reduced profit margins in the context of the Liverpool economy, the development would be unable to generate surplus returns to meet the costs of planning policies in respect of this application.”
Centric House is on Moorfield and also faces onto Dale Street, had previously been occupied by Barclays Bank but it moved out of the property more than a decade ago.
However, despite spending more than £200,000 to upgrade the office accommodation CERT struggled to attract tenants. Since the acquisition the space has never achieved an occupancy above 15% and CERT has had to pay annual running costs of £192,000.
In the central business district occupiers are seeking either Grade A or high quality secondary space. “Architectural constraints” made it a challenge to bring Centric House up to that standard.
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Some occupiers may also have been put off by the location. Moorfields has deteriorated in recent years with derelict properties and Moorfields Merseyrail station in need of a facelift.
CERT has decided to pivot to residential in order to extract some value from their investment. The residential scheme would include one and two-bedroom apartments and duplexes. LBN has contacted CERT for comment.
Councillors will consider the application again at a meeting on Tuesday, June 25.