There has been an explosion of development activity in the past couple of years. Charlie Jacoby discovers that South Wales is nearing saturation point for retail and leisure.
South Wales’ retail and leisure markets are reaching a healthy level of near-saturation. The Valleys towns have their fill of schemes, either built, under construction or proposed. And in major centres such as Cardiff, demand is strong enough for smaller, less well-located, new retail shed schemes to prosper. Many potential tenants are being pushed out of the prime parks by stronger covenants.
There is a faintly end-of-term feeling about the market-place as it waits for the Secretary of State for Wales to issue the Welsh versions of PPGs 6 and 13. Expected to broadly resemble the English guidance notes, developers are now trying to get all necessary consents, just in case.
Town centres along South Wales’ coastal strip are performing well. Cardiff’s prime pitch, Queen Street, is seeing zone A rents of more than £1,615 per m2 (£150 per sq ft). Commercial Street in Newport hits £1,184 per m2 (£110 per sq ft) zone A, and Oxford Street in Swansea goes as high as £1,238 per m2 (£115 per sq ft) zone A. Investment values are fantastic, with prime Cardiff city-centre units reaching 4.25% and out-of-town prime between 7% and 7.25%. “There are very few areas in the UK that have the domination of an area that Cardiff has, and investors like that,” says Peter Graham of Stephenson & Alexander.
The biggest retail news is in Swansea, where the city council and the Welsh Development Agency are redeveloping Oxford Street. Castle Quays is a 27,870m2 (300,000 sq ft) shopping centre originally proposed by Tarmac, but the company failed to meet the council’s deadlines so the scheme has gone out to tender. A developer shortlist will be announced at the end of April. The centre will provide a new House of Fraser with a mall of shops behind, to be marketed by Donaldsons. “There are about 25 unsatisfied requirements for Swansea, less for Cardiff and about 15 for Newport,” says Graham.
Another nearby town-centre scheme on the stocks is the 9,290m2 (100,000 sq ft) of retail space which Redrow is planning to build in Llanelli. On the junction of Stepney Street and Vaughan Street, it will be anchored by Asda. Letting agents DTZ Debenham Thorpe and Mason Owen want to achieve £538 per m2 (£50 per sq ft) zone A.
Swansea’s profile is fitting the bill for foodstores at the moment. “There is demand from Tesco, Safeway, CRS and Waitrose, especially on the west side of the town, and there is a grave shortage of sites,” says Graham.
Sainsbury is to redevelop its Homebase unit on phase one of Parc Tawe as a superstore. Homebase will then take 3,066m2 (33,000 sq ft) on the second phase of 9,290m2 (100,000 sq ft) which Simons of Lincoln has been selected to develop. Advised by Stephenson & Alexander, Sainsbury will put in an application soon.
Heading towards Cardiff, Port Talbot is to see a new town-centre scheme. Port Talbot council joined forces with the Land Authority for Wales to buy 21 residential houses and so assemble a 3.6ha (9 acre) site near the existing shopping centre owned by MEPC. Represented by Healey & Baker, they had 30 tenders and an existing local landlord is thought to be the chosen developer. The Land Authority for Wales has carried out site assembly on 10 of the last 14 town-centre redevelopments.
In Barry, Chesterton and Cooke & Arkwright are advising on the proposed 40.5ha (100 acre) Waterfront scheme. This will include a new retail park, plus residential and leisure elements.
Cardiff itself has only one large out-of-town scheme in the pipeline, following the success of Culverhouse Cross, North Pentwyn Retail Park at Cardiff Gate and Ferry Road Retail Park. Wilson Bowden Properties, advised by E J Hales and Colliers Erdman Lewis, plans 27,870m2 (300,000 sq ft) anchored by a major superstore of 9,290m2 (100,000 sq ft). Situated on Ferry Road, prelets on Cardiff Bay Retail Park are quoted at £129 per m2 (£12 per sq ft).
This dearth of proposals in the Principality’s capital is having a good effect on rents for anyone with space still to let. At McAuley Developments’ 9,755m2 (105,000 sq ft) Glamorgan Vale Retail Park, north of junction 32 of the M4, agents King Sturge & Co and Philips Wilks are quoting £108 per m2 (£10 per sq ft) for the remaining 929m2 (10,000 sq ft) unit in phase two. When the units were built last year, £92 per m2 (£8.50 per sq ft) was quoted, with achieved rents reaching £86 per m2 (£8 per sq ft). “That’s quite a reasonable hike,” says KS’ Gareth Williams, “and, with a following wind, you may even find that £108 per m2 (£10 per sq ft) being pushed up. On some sites on Newport Road, developers are quoting £151 per m2 (£14 per sq ft).”
One of those sites is Culver Holdings’ 1.2ha (3 acres) on the corner of Newport Road and Colchester Avenue. On the books of Stephenson & Alexander and Ian Colston, the site has consent for 4,181m2 (45,000 sq ft). “Retail demand is very good here,” says Graham. “We’re getting rental offers and we haven’t even marketed it.”
Again, there is some foodstore activity. Aldi, advised by Stephenson & Alexander, is looking to open four stores in Cardiff and four in Newport. “Cardiff has got one of the strongest retail centres,” says Land Authority for Wales chief executive Bernard Ryan. “It has a series of out-of-town developments and they have not impacted on the city centre at all.”
There is some action in the leisure sector. Tarmac Atlantic Wharf Developments, subject to the signing of a planning obligation, will be granted outline planning permission for a large leisure scheme at Cardiff Bay, thought to be anchored by a UCI multiplex. Meanwhile, in the city centre, TBI is refurbishing the Cardiff Pavilion to 7,153m2 (77,000 sq ft) with the anchor rumoured to be rival multiplex operator Cine UK. Knight Frank is acting for TBI. There is no leisure provision between Cardiff and Swansea.
Cardiff city centre is seeing good demand from leisure occupiers, as the Chiquitos deal testifies. “The competition for pubs in Cardiff is incredible,” says Williams.
City-centre retailing in Cardiff reflects out-of-town retail. The city is trading strongly and there are no big schemes planned. This leaves a number of requirements. Woolworths, for example, is not represented in the city centre. “There is a lack of large shops for larger requirements,” observes Williams.
Most heartening is the continuing success of Queen’s Arcade. The 13,006m2 (140,000 sq ft) scheme, adjoining the 46,450m2 (500,000 sq ft) St David’s Centre, opened in April 1994, and looked as if it could not have been launched at a worse time. It has rallied strongly since then, however, and 80% of the floorspace is now let. There is one unit still to let on the upper level and 10 on the lower level. Quoting zone As range from £1,076 to £1,292 per m2 (£100 to £120 per sq ft) on the upper level and £861 to £1,076 per m2 (£80 to £100 per sq ft) on the lower. Joint developers are BICC Developments and SPP Investment Managers, and letting agents are Healey & Baker, E J Hales and Lunson Mitchenall.
At the Capitol Centre, Habitat has taken a 1,858m2 (20,000 sq ft) unit to replace the Reject Shop. Ian Metcalfe, director of retail at Cooke & Arkwright, which acts with JLW on the scheme, explains that Habitat originally abandoned the city centre five years ago in favour of an out-of-town location but has now chosen to return to the city centre.
Newport faces a battle over leisure. Virgin has consent for a multiplex cinema at Newport Retail Park. But, at Kleppa Park, Newport council and the WDA have agreed terms with Castlemore Securities for a mixed leisure centre and multiplex on 10ha (25 acres) next to junction 28 of the M4. Castlemore Securities is believed to have paid £10m for the site.
The market favours Kleppa Park at the moment, but it is quite aware of the powerful magic that Virgin can sometimes work. “I don’t think Kleppa Park is going to affect the Cardiff schemes,” says Williams. “It’s only 20 minutes away, but it draws on different catchments.”
Newport town centre never got its planned barrage, to the lasting regret of many people. Now, plans are being forged to rejig the town centre. “Because of the loss of the barrage, I think there’s a will for improvement with something else,” says KS’ Stephen Tyler.
Beyond the Valleys
Merthyr Tydfil town centre is about to be transformed. A client of Stephenson & Alexander, as yet undisclosed by the WDA, is to redevelop the former goods yard to provide 8,593m2 (92,500 sq ft) of retail space. Burton Property Trust had similar plans in the late 1980s, but pulled out.
With 15 units, including three large ones of 929m2, 1,394m2 and 2,508m2, (10,000 sq ft, 15,000 sq ft, 27,000 sq ft) the development will front the High Street, where zone A rents are currently just under £538 per m2 (£50 per sq ft) at best. However, this scheme will hit the market at quoting zone As approaching £600 per m2 (mid-£50s per sq ft).
The local council is also looking at proposals for an out-of-town development on the new link road. No developer has been chosen for that yet, however, and many people believe that Merthyr couldn’t sustain both schemes.
Chesterfield Properties refurbished its central, 18,580m2 (200,000 sq ft) St Tydfil Square as a defensive measure against new retail development three years ago. “It has seen zone A rents go up from £377 to £538 per m2 (£35 to £50 per sq ft),” says Robert Hales of E J Hales, which is joint letting agent with Colliers Erdman Lewis. The last of the new units was let to Going Places at £513 per m2 (£47.67 per sq ft) zone A.
In Caerphilly, Boots Properties opened its 13,935m2 (150,000 sq ft) Castle Court shopping centre last September. Consisting of 31 retail units, a supermarket, petrol-filling station and 1,115m2 (12,000 sq ft) of offices, the centre is on the books of Hartnell Taylor Cook and is now 80% let. The site was originally put together by the Land Authority for Wales
Gwent Shopping Centre in Commercial Street, Tredegar, was refurbished and extended six months ago by owners TBI and the WDA. It now consists of 26 units anchored by Kwiksave, Tesco and Woolworths. Agent E J Hales reports zone As of between £215 and £269 per m2 (£20 and £25 per sq ft).
Brunswick Developments has split the former Co-op unit in Aberdare into seven units. Argos took 697m2 (7,500 sq ft). Zone As, according to agent E J Hales, are £269 per m2 (£25 per sq ft). The same agent is also marketing the freehold of the 2,787m2 (30,000 sq ft) Tesco store on the corner of Station Street and Cardiff Street for £950,000. “This town is going to look very different in two years’ time,” remarks Hales.
Boots Properties is due to complete its 20-unit Bethel Square scheme in Brecon by July. The two anchors have already been let to Boots and John Menzies, who took 325m2 and 725m2 (3,500 and 7,800 sq ft) respectively . There are still 15 units to let through agent E J Hales. Zone As reach £323 per m2 (£30 per sq ft)
King Sturge & Co is marketing 62-64 Taff Street, Pontypridd – a three-unit infill scheme totalling 335m2 (3,600 sq ft). Developed by Peel Holdings, it has seen lettings to Tariq and Holland & Barrett at zone As of £431 per m2 (£40 per sq ft).
“I think the focus is going to shift from Cardiff and Newport to the Valleys, because they have good catchment and are cheaper,” says King Sturge & Co’s Gareth Williams. “You don’t drive up a valley and see coal mines anymore. You drive up and see green fields.”
