Tough challenge The St David’s Partnership is confident its St David’s 2 will ride out the economic storm. By Stacey Meadwell
Cardiff city centre is a mess. The adage goes that you cannot make an omelette without breaking eggs. For the Welsh capital, the eggs are well and truly broken as the St David’s Partnership carries out construction work on its 967,500 sq ft retail-led development St David’s 2 and refurbishes the St David’s centre.
Retail commentators probably looked on with mixed emotions as the 1.5m sq ft Cabot Circus opened in September in Bristol, just 50 minutes drive away, having gone through a similar painful transformation.
And some might say that Cabot has had the advantage of securing most of its tenants before the economy took a dive. As Land Securities, joint venture partner with Capital Shopping centres on St David’s, and also joint developer with Hammerson on Cabot knows, negotiations were getting tougher in the months preceding its opening.
So with Cardiff city centre in chaos, and the country teetering on the edge of a recession, could the challenge be any greater?
Mark Rymell, development manager at LandSec, is sanguine: “The economy has been better, but Cardiff has moved ahead as a city over the past 20 years. It’s more economically vibrant and it has seen a lot of inward investment, but retail hasn’t grown.”
John Lewis has been secured for its second-largest UK store, and 50 of the 120 shops are let or have deals in solicitors’ hands.
However, Rymell admits that while recent deals may have seen “rents holding up well”, the partnership has had to be more flexible with incentives.
Stephen Jones, partner at King Sturge, says that while John Lewis is great news for Cardiff, “quite a lot of the retailers you’d tick your box for the shopping centre are already there, so the partnership has quite a lot of new challenges because it is extending what is already a strong centre”.
He adds that, with the recent spate of retailers falling into administration, the partnership will no doubt be asking itself whether a prospective tenant will still be around in two to three years’ time.
“St David’s hasn’t quite got the momentum yet, and you could be negative and say the market is tough and retailers are struggling. But now that Cabot Circus is open, retailers that are new to Bristol will inevitably look at Cardiff,” says Jones.
In terms of competition for lettings, Cabot Circus had Grosvenor’s Liverpool One, and Highcross in Leicester also opens this year. Next year, St David’s 2 is the only large centre that is due to open, which could be an advantage.
Rymell insists that there will be no compromises on quality of tenant if the market gets tougher. “Getting the retailer mix is fundamental to the long-term view,” he says.
Rymell says that, despite the disruption during the refurbishment of the existing St David’s, footfall has not dropped, and anecdotal evidence suggests that retailers are trading well.
With fresh economic gloom on an almost daily basis, it is difficult to gauge how confident retailers will feel about signing up for space in six months’ time, but for the time being, Rymell is happy. “Things are going well,” he says. “It’s a sunny day, and I’m looking out at the site and I can see five tower cranes. This time next year, we’ll be about to open.”
Market at a glance
In-town rents are stable at £300 per sq ft
Out-of-town rents are stable at £26.50 per sq ft
St David’s 2 is a 967,000 sq ft retail-led mixed-use scheme, due to open autumn 2009
Anchored by a 260,000 sq ft John Lewis store
Experian predicts Cardiff will jump from 11th to eighth in the UK’s retail rankings
