New stadiums are all the rage: (2) Everton

Stadium rebuilds and upgrades are all the rage in football right now. Big clubs are in an arms race to create venues that maximise revenue, from high rolling fans quaffing champagne in hospitality, curious tourists wanting to snap selfies in the team museum, or from music lovers willing to splash our to big name artists perform on the pitch. Small clubs want a piece too, in an effort to avoid being completely left behind.

To do all this, some are appealing to central governments for funding — ostensibly to improve transport links and set up the area for long-term economic growth.   The Financial Times lays out the broad strokes of that debate in England in their latest Big Read, which takes you on a tour around Liverpool, Birmingham, Manchester and Leeds.

Transport is just one of the major hurdles these stadium projects face. Planning can be slow and cumbersome, especially as most existing venues sit in the middle of densely populated residential areas. Just ask Real Madrid what complications that can bring, even when the building work is done. And competition for music acts is fierce — there are only so many Taylor Swifts and Beyoncés to go around.

Then there’s financing. Football clubs are seen as pretty bad borrowers, and as such tend to face painfully high interest rates. Stadiums are different — they have more reliable and visible revenue streams attached, due to sponsorship and hospitality. But those benefits tend to kick in only once the place is up and running.

“Ensuring these, plus various other factors, come together is no easy feat but the ultimate rewards from stadium-led regeneration can be huge and felt far beyond the stadium itself,” said Becky Stormer, head of UK sports sector at real estate services group CBRE.

And there’s another major challenge that doesn’t get talked about as much: finding a builder willing to take the job on. There are plenty of cautionary tales from the past of contractors buckling under the pressure of a stadium build, meaning many now steer clear of the sector.

“The risk profile of these stadiums now means it is very difficult to find a contractor who will take these projects on,” said John Rhodes, director of sports and entertainment at architecture firm HOK. “They don’t want to take the risk because these projects are big. The liquidated damages are big. If you don’t deliver, you’ve got to pay for the revenue the building is not generating.”

He adds: “It’s also the brand impact. If that stadium’s not finished, you’re on the front of the newspaper every day.”

With building costs and borrowing costs both rising fast, the economics of a stadium upgrade or rebuild are looking increasingly challenging. Tottenham Hotspur chair Daniel Levy has previously said the club simply wouldn’t have been able to build their £1.2bn stadium if the plan were trying to get off the ground today.

And yet, to some extent, clubs have little choice but to push on. Bigger clubs are getting bigger, and staying competitive on the pitch increasingly means doing the same off it. Or, as one club chair put it: “The numbers are mad. But the only thing madder than doing it is not doing it.”

Everton and Bramley Dock

Colin Chong, who recently oversaw Everton’s plans for the new stadium at Bramley-Moore Dock on the northern fringe of Liverpool city centre, was among those addressing investors at the recent property conference in Cannes. He previously worked on the 2002 Commonwealth Games stadium in Manchester, which was subsequently taken over by Manchester City and which has helped to spearhead a wave of regeneration in the former industrial area around it.

Along with local leaders, he wants government support to help kick-start Everton’s regeneration plans along Liverpool’s famous waterfront, including new housing and entertainment space, to help revive one of the country’s poorest urban areas. Everton is in negotiations with landowner Peel Land and Ports to acquire part of a site between the stadium and the city centre, which already has planning permission. ‘“We haven’t got hundreds of millions to invest in public transport infrastructure when it’s going to be used for six hours every fortnight” he told the Pink ‘Un.   Chong argues that public money will be needed to redevelop it “without a doubt”. Land values and returns on investment are lower outside the South East, he says, meaning large regeneration schemes often require state support to make them stack up commercially.

 “We need a third of financial support to come from government,” he says of Everton’s regeneration plans for the site. “Until we’ve got that commitment, things really aren’t that viable.” Liverpool city region mayor Steve Rotheram says there is a case for expanding transport links to the area — but only if they will be used regularly by new residents, and not just by fans going to games.

 “We haven’t got hundreds of millions to invest in public transport infrastructure when it’s going to be used for six hours every fortnight,” he told the leading sports business paper . Liverpool’s political leaders are incorporating Everton’s proposals in their pitch to the government for housing investment across a swath of the city’s most deprived areas under Labour’s “new towns” programme.

The party hopes to create 12 such new communities, some of which are likely to be extensions within existing cities. Local politicians are also considering setting up an urban development corporation — a tool first used in the city in the 1980s, intended to fast-track planning — across part of that area.