Soaring land values and unexpected construction costs have forced developer Grosvenor to take a £140M hit on its Liverpool One regeneration project, it was revealed this week.
The £1bn, 17ha Liverpool One or Paradise Street project was conceived in 2000 as a catalyst for regeneration of the ailing port city.It will provide a mix of retail, leisure, office, hotel and residential space in Liverpool city centre.But the scheme has been a victim of its own success, said Grosvenor project manager Rod Holmes. 'We committed a budget to the project when it was little more than a masterplan and we underestimated the impact that our investment would have on land prices and construction costs,' he said. 'We've been hit on two heads. We have had to make a provision of £140M.'Grosvenor is carrying all risk for design and construction up to trade fit out to eliminate the danger of disputes derailing the delivery timetable, Holmes said. The first phase is to be complete by the end of next year. Holmes said that land values surged while Grosvenor was still going through the compulsory purchase process to consolidate its site, pushing up its land acquisition costs by close to £100M.And in the past three years construction costs have rocketed as other developers have leapt on to the regeneration bandwagon.Holmes added that there have been some one-off unforeseen construction costs. Grosvenor had to unexpectedly fund construction of a large diameter sewer to store storm water. And some late design changes to a tower designed by architect Cesar Pelli, forced by planners who were worried about the building's impact on Liverpool's World Heritage Site status, resulted in increased construction costs.Holmes said that the first phase of the project, which accounts for two-thirds of the site and is being built by Laing O'Rourke, is on schedule for completion by the end of 2008. Groundworks for the second phase, being built by Balfour Beatty and Kier, are almost complete, drawing a line under the project's major risks, Holmes added.