Liverpool has only limited improvement to show for all the money that has been thrown at it over the past 20 years. But now big commercial developments and innovative housing partnerships are changing the view from the Mersey.
Since the Toxteth riots of 1980, Liverpool has had every kind of urban regeneration initiative thrown its way.

Starting with an urban taskforce and urban development corporation, the city has benefited from city challenge money, housing action trust money and the single regeneration budget. Yet the city still languishes, with a low gross domestic product and derelict buildings and gap sites within yards of its commercial core. Merseyside has been designated a category one area by the European Regional Development Fund, meaning it is among the most deprived in the European Union.

Last year, Liverpool Vision was set up as one of the UK's first three pioneer urban regeneration companies created on the recommendation of Lord Rogers' urban taskforce report. In its strategic framework, published last January, Liverpool Vision promised to channel more than £1.5bn of investment into the city centre and create 10,000 "long-term, sustainable jobs". In addition, a slew of regeneration strategies and partnerships are being promoted by Liverpool council, local housing associations and other public and private sector organisations. The latest is the Liverpool Land Development Company, set up by the council and the Speke Garston Development Company.

Will these initiatives bring long-term sustainable regeneration?

A straw poll of local developers, property agents and contractors reveals a cautious optimism in place of traditional Scouse cynicism. Liverpool is not experiencing a construction boom on the scale of Manchester after the 1996 IRA bomb. But there is a healthy sprinkling of construction sites, and these look set to increase as Liverpool Vision works in partnership with the council and other organisations to implement its strategic framework.

Urban Splash, synonymous with must-buy loft conversions in Manchester, is actually based in Liverpool, and has just completed three sizeable conversions in the city: one purely residential, another mixed commercial, and a third, near Speke airport, which is fully commercial. Urban Splash director Bill Maynard says: "We think the residential market is strong in Liverpool. There is steady demand and values have increased significantly."

In the commercial sector, Maynard is more cautious. "The commercial market needs to have its confidence restored, partly by the introduction of residential development in the city centre," he says. "We started the process with our Concert Square five years ago. People now talk about the need for purpose-built new office developments, but I don't think the market could support speculative development yet."

For contractor HBG Construction, the volume of work in Merseyside has increased steadily, according to Andy Thomas, director of the north-west division. The firm is buoyed up by continuing growth in the higher education sector – Liverpool has two universities and a clutch of colleges – and has won a £20m contract for the lottery-funded refurbishment of the Liverpool Museum & Walker Art Gallery and one worth £6.3m for an extension to the Alder Hey children's hospital. "Our turnover in the region is about £60m, of which 30-40% is in Merseyside, whereas a few years ago it was only 15-20%," says Thomas.

On the commercial and retail front, Thomas sees hope in the large national developers that are beginning to take an interest in Liverpool. Blue-chip developer Grosvenor Estates and the huge Henderson investment fund are planning a £700m shopping development at Paradise Street, and Peel Holdings, owner of the Trafford shopping centre in Salford, has bought Speke airport and is planning a 300,000 m2 extension to the adjoining retail park. "Liverpool needs out-of-town people to kick-start it," says Thomas. "When you get a firm like Grosvenor, things tend to happen."

Social housing development and refurbishment in Merseyside are often seen as catalysts for general urban regeneration, and this policy calls for the establishment of complex partnerships. At Project Rosemary in Toxteth, for instance, housing refurbishment was used as a lever for the development of a hospital and a marzipan factory, which have become major employers in the area.

A groundbreaking strategic housing partnership was set up in 1999, bringing together local housing associations and the council. Last month, a £125m regeneration scheme in the Kensington district was launched with the creation of a pioneering community-based housing association called Community Seven, which pools 2000 homes from 11 housing associations and the city council. This association has been set up "to deliver improvements to the area by working closely with residents of five neighbourhood panels".

Looking ahead, development proposals for the city centre are pooled in Liverpool Vision's strategic framework. The stated aims of the framework are nothing if not ambitious. In the foreword, Liverpool Vision's chairman, Sir Joe Dwyer writes: "There is no reason why our city cannot regain its position as a first-class European city, fit for the 21st century."

The strategic framework points to the city's 800th anniversary in 2007, and a bid as European capital of culture in 2008, as pegs from which to hang regeneration projects. These will be aimed at seven "action areas" in the city centre, including the Pier Head on the Mersey waterfront, the derelict docklands of Kings Waterfront and the retail core. Proposals for physical improvement of these areas tend to be modest and attainable, and concentrate on improving the existing public realm of streets, squares and open spaces and reusing vacant buildings. But three huge development proposals stand out. They are the £300m Kings Waterfront development of leisure facilities clustering around a 55,000-seat football stadium for local team Everton, with Houston Securities as developer and HOK Sport and Ellis Williams as architects, and the Walton Group's £300m Chavasse Park retail scheme, which rivals Grosvenor Henderson's Paradise Street proposals.

The council favours the Grosvenor Henderson scheme, yet it cannot break an earlier commitment to the Walton Group.

The latter is due to be reviewed in a DTLR public inquiry this month, and it could take another two years for a decision to be made.

Despite the potential for planning blight in this dispute, local developers and property agents are optimistic that the strategic framework will encourage development – but not overnight.

"Liverpool Vision has no resources and powers of its own, so the strategy has got to be a 10-year programme," says Maynard of Urban Splash. "There is always a gap between vision and implementation, and that means a lot of time spent in consultation and integration between Liverpool Vision, the council and other funding organisations."

Urban Splash has made good use of development grants over the years. But two years ago, the relatively generous regional development grants were suspended by the EU, so developers must now go for "funding cocktails". Maynard says: "It's getting ludicrously complicated, and can add two or three years to the development process. We need a single integrated approach to gap funding that will pump-prime a project at the initial stage and stimulate the private sector."

As well as from Liverpool Vision and its new strategic framework, local developers and agents take heart from the council, traditionally the bogeyman for private entrepreneurs. "There has been a complete and utter shift in the council since it switched from Labour to Liberal Democrat," says Maynard. "Mike Storey [the council leader] sees the potential of encouraging investment in the city centre. He has promised to turn the council into Britain's most business-friendly, and that is extremely positive."

Chris Cannon, partner of commercial property agent Mason Owen & Partners, also sees positive signs in the people at the top. "Over the past 18 months, as the plans come through, we are seeing new personalities coming in, such as Mike Storey, new council chief executive David Henshaw, and Liverpool Vision's chief executive, Jim Gill," he says.

"I think they've still to gain respect in the city, but they all know the city extremely well and they're more communicative and open than their predecessors."