Liverpool City Council admits defeat in efforts to secure an institutional investor to fund the £60m Pall Mall office development and now the whole scheme will be funded by the taxpayer. Tony McDonough reports
Efforts to find a private funder for the £60m Pall Mall development in Liverpool have floundered so the scheme will now be funded entirely by the public sector.
Last week LBN reported how Liverpool City Council and its development partner Kier Property have chosen VINCI, which is already working on major council-led projects in Southport, Bootle and St Helens, to take forward the 111,500 sq ft scheme.
Pall Mall will provide desperately-needed grade A office space in the commercial district. There has been no significant addition to the district’s grade A stock since the construction of St Paul’s Square 14 years ago.
Both the city council and Liverpool City Region Combined Authority have pledged cash towards the project but the city council’s aim was to secure the backing of an institutional investor to provide a big chunk of the cash.
Wirral Council secured a similar deal for its new office buildings in Birkenhead. The £75m project, comprising two buildings totalling 147,767 sq ft, was backed by Canada Life. The council has occupied some of the space and offered Canada Life a rent guarantee, offering to pay the rent on the unoccupied space.
Liverpool went to the market with a similar proposal. However, a report being presented to the city council cabinet on Tuesday, July 14, concedes this has not been possible.
It says: “The original forward‑funder investor model has proven challenging in the current office investment market.
“This is largely because of weaker investment yields applied to commercial property since the pandemic rather than other commercial considerations such as a lack of occupier demand.”
It added: “Even with a 15-year Council rent guarantee to underpin investment value, it has been challenging to secure firm investment interest to buy the development in advance at the price required.”
Now it is proposed the council will borrow £20.6m, add that to £22m from the Combined Authority’s £2bn investment fund and another £15m from the Ministry for Housing, Communities, and Local Government. £1.9m from Section 106 payments will make up the rest.
It is hoped an institutional buyer can be found once the development is completed enabling the taxpayer to get a return on the investment. Building work could start in the first quarter of 2027.
Pall Mall was originally due to go ahead in 2019 with a pre-let from telecoms giant BT. However, following the pandemic BT reassessed its office needs and put the Liverpool letting on hold.
The appointment of VINCI, following a two-stage tender process, marks an important milestone for the Pall Mall scheme, which will deliver net zero carbon-enabled office space alongside ground-floor retail and a new 0.5-acre green space.