Liverpool’s investment levels are finally on a par with old rival Manchester. Paul Unger reports
Liverpool has at last started to hear up close the sound of the investment boom that has been enjoyed by the other main northern cities for several years.
Yields are tightening fast and any discount offered to attract tenants has all but disappeared in the city centre and beyond (see box). Last year started with Strategic Investment Management’s purchase of the first phase of English Cities Fund’s St Paul’s Square for £40m, against a yield of 5.5%.
In August, Henderson Warburg bought 101 Old Hall Street, which is occupied by the UK Passport Office and Unisys, for £39m from the Beetham Organization and Ethel Austin Properties at a net initial yield of 5%. By December, yields had decreased to 4.7% when London & Capital paid £49m to Close Brothers for City Square on Tithebarn Street, let to the Home Office and civil law courts.
The annual Liverpool Office Market Report, produced jointly by urban regeneration agency Liverpool Vision and the Merseyside Property Forum, points out: ‘During 2006 a large and growing pool of investors competed to buy highly prized lots. Total demand for office investment in Liverpool amounted to as much as £500m by the close of 2006. With supply tight, much of it remained unsatisfied.’
Stuart Keppie, partner at Keppie Massie surveyors, feels Liverpool is catching up. ‘Liverpool is no longer discounting. The proof is in the yields that have been relatively comparable with Manchester,’ he says.
‘At the high end of the market, we’re possibly only six months behind Manchester.’
Competition with local established names such as George Downing, Bruntwood, Merseyside Superannuation Fund, Langtree, UK Land & Property – who have the ear of landlords and know the best angles to maximise the value of site means institutions will be forced pay more to trump a strong home-grown market.
Downing Developments beat half a dozen bidders to buy New Hall Place from insurer Royal & Sun Alliance for £50m at the end of 2005. Liverpool-based UK Land & Property finally sealed the purchase of Horton House from Walton Group last summer, but only after the kind of lengthy talks with Walton chief Bill Davies that may have put City institutions off.
Among the likely new-build targets are Rumford Investments’ recently completed 20 Chapel Street formerly called Unity at 150,000 sq ft (13,935 sq m), and the second phase of St Paul’s Square, a further 130,000 sq ft (12,077 sq m). Refurbishment and secondary candidates include 60 Old Hall Street, Moor House and the Cotton Exchange.
Liverpool’s hotel market is regaining occupancy levels and prices per room rose faster than the rest of the country for two of the last three years, according to research from Deloitte.
In January Malmaison opened its first new-build property at Princes Dock and the boutique Hope Street Hotel is expanding. Two hotels are under construction at Kings Waterfront; Iliad is building another boutique hotel on Sir Thomas Street and the Hard Day’s Night Beatles-themed hotel opens in the autumn.
Mark Bailey, senior hotel negotiator in Knight Frank’s northern hotel team, says: ‘Hotel performance has been robust and, with the emergence of a new breed of hotel investor, we can expect much more activity in 2007. Smaller hotels in particular could be targets for investors new to the sector.’
Bold investors could buy an office building in the day and sleep in their own hotel at night.
Regeneration spreads north
Talk of Liverpool’s renaissance has long focused on the city centre, but there are signs that investment is now stretching outwards.
John Kelly, who rose from head of policy to take over from Charlie Parker in January as director of regeneration at Liverpool City Council, says attracting funds to the deprived streets of north Liverpool will be a priority.
He has already attracted a group of developers, comprising Urban Splash, Keepmoat, Bellway, St Modwen, Barratt and Peel Holdings, which owns 120 acres (48.5 ha) in Central Docks, who are active in the city to agree to the North Liverpool Development Plan to look at opportunities in the area.
‘For Liverpool to be a truly international city once more it has to provide a world-class offer around the city and not just in its centre,’ says Kelly.
From an office investor’s viewpoint, there are various safe bets in the large public sector occupiers in north Liverpool and Bootle.
Magdalen House, an 85,000 sq ft (7,897 sq m) prelet to Sefton Metropolitan Borough Council, was bought from Moorfield Properties by London-based Nightingale Estates, for £9.6m at a yield of 4.75%.
Hopefully, it is the first in a new wave of much-needed funding in the area.