Cardiff Bay sees tide turn for real estate

Copyright: David Lawson/Financial Times May 1998

Home page

A strange thing has happened to the multi-billion-pound scheme to regenerate Cardiff Bay. Sometime in the last couple of years it  became respectable.

  For the last decade,  more criticism than credit was generated over  the transformation of  derelict docklands into an economic and cultural powerhouse. Conservationists hated the new barrage for wiping out  mudflats; locals complained that cellars would be flooded; designs for a grandiose  opera house died in a  storm of protest.

 Now the storms have subsided and the urban development corporation is basking in unaccustomed praise for the last couple of years of its life. Cardiff has done something that its rival capital London never quite managed: the giant docklands redevelopment has been accepted as part of the city.

  Mike Rees, local head of property consultant Chesterton, was a vociferous early critic. 'At the start there was an element of competition with the city centre and suspicions that the Bay was only moving occupiers from one part of Cardiff to another. Now it is part of one whole,' he says.

  Some element of  rivalry continued over the new Welsh Assembly. Cardiff's City Hall went head-to-head with the Bay - and lost. But the prestige development could have gone to Swansea if land and ancillary office space had not been available  in the Bay.

  Other major schemes  are also unlikely to have come here without the  land - and financial incentives - offered by the Bay. Sir Rocco Forte's first hotel since his family-founded chain was gobbled up by Granada is rising like a great white wing over the seafront. This is  testimony to the spectacular  site overlooking what will be a 500 acre freshwater lake when the barrage is completed this year, but also to the potential for high-value international business as firms move into the Bay.

  The  250m pound proposal by Philips and European Construction Group for a sports village surrounded by 600,000 sq ft of offices, shopping and housing would also have been far out of scale for the old city.  Behind all its ambitions for international significance, Cardiff is basically a small provincial town. It did not have the capacity for such large projects until the Development Corporation was set up to renovate 2,700 hectares of docks and former steelworks making up around a sixth of the city.

  Around 800m pounds of private investment have been levered into the area, producing 1.2m sq ft of offices, twice that amount of industrial space and almost 2,500 homes. Sir Geoffrey Inkin, who has chaired the development corporation from the outset,  is remarkably laid back about the fact that this generated more brickbats than praise until recently.

  'People hate change,' he says. 'But once new things are accepted, they forget there were any differences.'

  Whether this will persist when the development corporation is wound up in two years remains to be seen. Who takes over the massive regeneration is still in the melting pot.  Cardiff County Council seems the most likely lead body, particularly now that it is based in the Bay. But a super-quango made up of the Land Authority for Wales and Welsh Development Authority could still have an umbrella role. The neighbouring Vale of Glamorgan council also has interests.

    A few years ago councillors  would have bridled at the cost of regeneration but Sir Geoffrey expects to have achieved 75% of his  targets by then. These involve around 4m sq ft of offices, nearly 5m sq ft of industry and 6,000 homes. 'We are on an exponential curve, with activity accelerating all the time,' he says.

  The Assembly will make that timescale even more likely. Grosvenor Waterside, which owns much of the Bay,  is already planning 70,000 sq ft of speculative development on the back of its successful bid for the Assembly. A calculated gamble to offer the Welsh Office a site for practically nothing should pay off with enhanced development profits on surrounding schemes. Crickhowell House, an early letting success which appeared to be turning into a problem as the health authority wound down, will provide offices for civil servants. And the distinctive red Pierhead building will be home  for ministers.

  This is encouraging companies like Hyder and HTV to  sniff around the Bay for new headquarters. Every chairman likes to be close to political decisionmakers. Rents are bound to set new highs, overtaking the  17 pounds a sq ft being asked in the city centre, and bring  investors scuttling down the M4 from their London ivory towers.

  BA Pension fund has already set a record yield of 7.5% backing Tarmac Richardsons' 165,000 sq ft Atlantic Wharf leisure complex next to the Millennium Arts Centre. According to lead agents Jones Lang Wootton, Bass has found its Hollywood Bowl is the best performer in its portfolio. Harry Ramsden is discovering the same  with its fish and chip restaurant - perhaps not surprising with 1.5m leisure visitors into the Bay each year.

  Schroder is another blue-chip investor, backing Sovereign Land's 20m pound Mermaid Quay. It has also paid 22m for the first phase of  Wilson Bowden's retail park. High-growth technology and media firms moving into developments like the 300,000 sq ft Celtic Gateway park will stimulate investment demand even further. CableTel, which is spending 400m pounds rewiring South Wales, is already in. Call centres like Serco's rail inquiry centre  are also queuing for space.

 Sir Geoffrey is so confident the momentum is now unstoppable that he is already planning retirement to his rose garden when the UDC winds up. It will make a pleasant change to be shovelling manure compared with those early years when it tended to  fall from the sky.