Cardiff remains one of the most resilient retail centres in the UK. Lauren Mills assesses the chances for competing locations along the M4.
“Cardiff stands unrivalled as the major retailing centre for the region,” claimsE J Hales’ Peter Hales. But he acknowledges that the city has not escaped unscathed by the recession.
Queen Street is prime, ranking with the best centres across the UK. Rents are holding at between £100 and £150 zone A. The former Foster unit, now occupied by fashion retailer New Look, was recently reviewed to £140 zone A. This proves the street’s resistance to falling market trends.
Cooke & Arkwright’s Ian Metcalfe is optimistic that the market is on the up: “In the first six months we’ve seen a substantial upturn.”
This is good news for Queens Arcade, Cardiff’s latest shopping addition, which is under construction. The 140,000-sq ft centre, by BICC Developments and London & Edinburgh Trust, will link into the existing St Davids Centre and will connect Queen Street to Working Street. It should open early next year.
Several prelets have already been agreed to Argos, Sears and the Leeds Permanent Building Society. More are expected, including Tower Records and Tesco. Joint agents E J Hales, Healey & Baker and Lunson Mitchenall refuse to confirm the rumours. Quoting rents range between £100 and £160 zone A.
While these lettings suggest that there is considerable latent demand for shops in Cardiff, the market is sceptical as to whether the centre’s split-level design will detract from its appeal.
Metcalfe believes that, ultimately, the scheme will be a success because of its location. But he admits: “A lot of retailers are sitting back to see how the two floors work.”
Few deny that Cardiff is capable of absorbing more shopping. But Queens Arcade’s impact on the city’s more established locations is a matter for speculation.
E J Hales’ Andrew Thomas says that the arcade is likely to hit peripheral locations hard. “It will concentrate the main activity to the prime area between Marks & Spencer and the Queens Arcade entrance.”
Many fear that Cardiff’s retail market will be at saturation point once Queens Arcade opens. Metcalfe replies: “We are already beginning to reach saturation, but Cardiff will not be overshopped.”
Several big names are knocking on the door – Warner Brothers, Disney Store, The Gap and Superdrug – but some agents doubt whether Cardiff’s existing space can accommodate them.
DTZ Debenham Thorpe’s Paul McAteer believes that there is a lack of prime, standard-size units and adds that “some retailers may see Queens Arcade as expensive”. He believes that, increasingly, many will steer clear of purpose-built schemes: “They will want to be out on the High Street to avoid paying service charges.”
Opportunities rarely present themselves in the St Davids Centre. The 350,000-sq ft scheme, which opened in 1981, continues to perform well. Main anchors include Marks & Spencer, Boots and Debenhams, and zone A rents range between £100 and £163.
Convinced of the centre’s potential, Land Securities bought it in a swap deal with previous owner, CIN Properties, in March. The scheme is believed to be worth about £70m. Terms of the deal have not been revealed.
GRE’s Capitol centre, although less central at the eastern end of Queen Street, is also trading well. The scheme, which opened two years ago, is 90% let to tenants including Virgin, Monsoon and Austin Reed. Letting agent Cooke & Arkwright reports rents ranging from £40 to £100 zone A.
Metcalfe believes that the Capitol can survive competition from Queens Arcade because it appeals to a different sector of the market. “We’ve gone for an upmarket image and this has attracted traders who are new to Cardiff.”
At the opposite end of Queen Street, Dixons Commercial Properties’ Queens West centre is struggling. The scheme, which opened in 1987, is described by Metcalfe as a disaster. He says: “It has no natural pedestrian flow and no anchor tenants.”
Rumour has it that the 86,000-sq ft centre is about to be sold. Chartwell Land is believed to be in the front running, with Woolworth lined up as the tenant. Colin Buckle & Co is instructed.
While the city-centre market braces itself for the arrival of Queens Arcade, things are hotting up out of town. Culverhouse Cross, to the west, is at the hub of current retail warehouse activity.
Proving the area’s popularity, Atlantic Properties has prelet all 86,500 sq ft at its Atlantic Park retail warehouse scheme. Tenants include MFI, Comet and Carpetright. Rents are thought to be in excess of £10 per sq ft – a new record for Cardiff. Fletcher Morgan acted for the landlord.
These units will add to the already powerful draw of Marks & Spencer and Tesco, which have been trading at Culverhouse Cross for the past year.
Newport
As Cardiff expands, few doubt its ability to encroach on neighbouring markets. Newport, only 10 miles away, is directly in the firing line. Commercial Street is prime, but rents got overheated during the peak, leaving the city to fight the stigma of being over-rented.
Metcalfe says: “Because there was no new scheme at the peak, retailers paid too much in locations that weren’t ideal. The city would need a substantial improvement in the market to support passing rents.” Some retailers are paying more than £100 zone A. Metcalfe suspects that today’s levels are more like £75 to £80.
“There is still demand for Commercial Street and deals are still being done,” says Metcalfe. Cooke & Arkwright recently sold 25-26 Commercial Street to Halifax Building Society. The agent achieved £132,500 pa, plus a premium.
Secondary locations, including P&O’s 1960s-built Kingsway centre, have been hardest hit by the recession. Anchored by Peacocks, Woolworth and Argos, rents range from £25 to £45 zone A. Although P&O continues to look at ways of improving the Kingsway centre, most agents agree that Newport needs a new scheme if it is to fight the growing threat posed by Cardiff.
Proposals to redevelop the bus station site have been scrapped and there is nothing else of significance in the pipeline.
Estates & General’s Cambrian Centre, which opened about three years ago, has done little to improve the city’s retail offer. Located behind Commercial Street and High Street, the 150,000-sq ft scheme has attracted tenants like Fads and Kwik Save. Rents are about £35 zone A. McAteer, agent for the scheme, blames bad timing for the centre’s performance. But he is confident that it will continue to attract tenants. “The Cambrian centre is located next to the main car park and has good pedestrian flow,” he says.
Swansea
Because Swansea is located further west than Newport, at least an hour’s drive away, Cardiff’s influence is less pronounced.
McAteer believes that Swansea’s role as South Wales’ regional shopping centre guarantees its long-term success. He says: “It has its own market and is not directly affected by Cardiff.”
Prime retailing centres around the Quadrant, together with Oxford Street, Whitewalls and Union Street. Owned by CIN Properties and Swansea City Council, the 300,000-sq ft Quadrant is anchored by Debenhams and Boots.
The city’s best zone A rents are £100 to £115 in Oxford Street. Prime rents in the Quadrant are up to about £70, although Richard Brown of managing agent Donaldsons hopes to achieve at least £80 in rent reviews, due later this year.
The Quadrant’s owners are currently considering options to improve the scheme. It is already set to benefit from the council’s pedestrianisation programme, which is nearing completion.
But Swansea has a long way to go before it rivals Cardiff. Plans to develop a major shopping complex on the gas station site, next to the Quadrant, are currently on ice. This is thwarting the city’s hopes of competing with Cardiff on a more equal footing.
Roger Thomas, of Cooke & Arkwright, which is advising landowner British Gas, blames the recession for the lack of activity. He says: “Discussions between the local authority and potential developers are continuing, but it hasn’t been possible to agree the best solution for this market.”
Most agents believe that the city needs more shopping and would like to see a scheme proceed. Brown shrugs off the potential threat to the Quadrant. “A new scheme would complement the entire city by attracting new retailers.”
Metcalfe contends that the city council’s aspirations for the gas station site have been overambitious. This, he believes, is holding up any potential development. He warns: “Swansea will eventually lose out if its facilities are not continually upgraded.”
But, even if Cardiff grows as planned, it will be some time before the effects are felt in Swansea.
The same is not true for Newport, which continues to suffer leakage to Cardiff. Newport Adcock, recognises the threat: “Cardiff provides very strong competition. We have tried to fill a niche in the market, but we have to recognise that Newport does not have the space to create opportunities like Cardiff.”
