Liverpool’s office market faces complex market failures resulting in a chronic shortage of new Grade A space. While demand for space is high, it hasn’t translated to the rental increases that would offset costs of delivery, resulting in viability challenges and limited supply.

As a result, the city is falling behind its rivals and missing out on major opportunities for high value growth in health, life science, professional, scientific, digital and creative markets – all of which are knocking on its door.

The role of repurposing
The only supply of Grade A space over recent years in the Central Business District (CBD) has been through the repurposing and retrofit of existing buildings. 20 Chapel Street is a recent refurbished scheme providing 155k sqft of Grade A space.

The wonderful India Buildings on Water Street and the Liver Buildings, which recently sold on to Princes for £60m, are other examples. But neither are Grade A – which is difficult and costly in historic retrofits – and both depend on significant public sector letting.

Retrofit also comes with viability challenges, as has been seen with Capital and Centric’s long-running efforts to repurpose the Littlewoods building on Edge Lane into the Hollywood of the North. The need for government funding to resolve market challenges is clear.

With ESG high on the agenda, retrofit offers a lower carbon route to delivery, and ensures existing stock remains compliant with upcoming changes to MEES regulations. Liverpool’s rich supply of heritage buildings offers an opportunity for transformation and delivery.

New build opportunities
Iceni’s Regional Economics team recently supported Liverpool City Council in securing £15m of public funding for the long stalled, 111,000 sqft Pall Mall scheme. It will be the first new Grade A development in the CBD in 16 years and is intended to support the retention of home-grown business, while acting as a catalyst for further investment.

We are now working in the city to help secure funding to deliver the Hemisphere ONE scheme in the Knowledge Quarter. This scheme is of comparable scale with similar viability challenges, but could transform Liverpool’s market for life science investment.

Schemes like the Spine, a remarkable 160,000 sqft Grade A space in the Knowledge Quarter, and Central Tech, a 27,000 sqft innovation hub, are both recent successes that show the strength of demand, and considerable economic impact of such schemes.

Future delivery
To resolve market failures and capture economic opportunities, the future of Liverpool’s office market will require a combination of new build developments and retrofit of existing stock. Strong public and private sector partnerships will be essential to provide a balanced, long-term strategy which meets modern occupier demands, drives investment, and shapes a resilient office market.

While this article focuses on Liverpool’s story, many cities across the UK are facing similar challenges in delivering viable Grade A office space. The lessons emerging in Liverpool are therefore increasingly relevant for other cities seeking to unlock economic growth via new office development and reuse of existing assets.

If you’re considering how to maximise your asset’s value or are struggling with viability challenges – in Liverpool or elsewhere – Iceni’s Regional Economics team and Retrofit and Repurposing specialists would be delighted to help.

To find out more, please do get in touch and have a look at our Retrofit and Repurposing brochure.