The plans would bring world-class ballet and opera to Manchester
Millions of extra pounds of investment is needed if plans for a northern base for the Royal Opera House are to be realised, a report has concluded.
The Royal Opera House said last year it was in talks to establish a presence at Manchester's Palace Theatre.
The report from Arts Council England said it had the "potential to transform the artistic life of the north west".
But it also warned the scheme was "not yet viable" and would require "significant" public investment.
The ROH wants a northern home for the Royal Opera and Royal Ballet, in addition to their base in London's Covent Garden.
Arts consultant Graham Marchant, who prepared the Arts Council-commissioned report, said the proposals required further work.
The estimated £100m cost of refurbishing the Palace Theatre, and the £12-£15m annual funding required for the project, would have to be found from central government, Mr Marchant said.
He also looked at the impact the ROH could have on other cultural institutions in the area, such as The Lowry, in Salford, and concluded an additional £5m annual fund would be needed to support organisations that would be affected by the change.
If the funding was not available, he said, then the negative effect on other arts organisations meant the scheme "should not go ahead".
Rod Aldridge, chairman of the trustees at The Lowry, said despite the "extraordinary benefits" the ROH could bring to the area, there were still "significant obstacles" to overcome.
He said: "We welcome the recognition that the massive impact on other arts organisations must be managed properly to ensure the plans truly enhance cultural provision in the region.
"Secondly, The Lowry strongly supports the recommendation that the proposal should only proceed if at least £20m in additional annual funding can be found to cover the costs of the new facility and to support arts organisations likely to be affected by the proposal."
Mr Marchant also suggested the proposal should be changed such that the Palace Theatre becomes "the home for opera and ballet in the region, led by ROH" in partnership with other companies, such as Opera North.
Alan Davey, chief executive of Arts Council England said: "This is an ambitious and exciting proposal which could bring real benefits to audiences and arts organisations working across the north west of England. But as Graham's report points out, realising the vision will require significant additional public investment.
"Graham's report maintains that an idea of this scale cannot be done 'on the cheap' and his assessment of both the set-up and annual running costs shows that the level of public investment required will be significant, and higher than originally expected."
Royal Opera House chief executive Tony Hall said: "I am excited about the potential of this project to further develop relationships with regional and national music and dance companies, and to make ROH a resource for the nation."
The scheme would create more the equivalent of more than 500 full-time jobs, and provide a "unique hub" for the development of creative skills training in the city, said Sir Richard Leese, leader of Manchester City Council.