Michael Blackley: Glass is half full for brewery developers

Published on Monday 9 February 2009 09:14

IT WAS once an industrial heartland, pumping out enough beer to fill 176 million pint glasses. Scottish & Newcastle's Fountain Brewery dominated the landscape of the whole Fountainbridge area and the hop-scented aroma of its productivity could be smelt from several miles away.

So when the doors closed in June 2005, it ended 150 years of proud brewing tradition at the 22-acre site.

However, it also signalled a new lease of life for Fountainbridge, moving away from its industrial past and instead becoming a new community hub of houses, offices, leisure and retail.

Developers were as sold on the potential of the area as city planners were. With Princes Street less than a mile away and the ever-expanding financial district practically on its doorstep, not to mention the picturesque Union Canal flowing by it, Fountainbridge was well recognised as among the top development areas in the whole of Edinburgh and its land was quickly and eagerly snapped up.

Yet what wasn't known then was that the harsh winds of the global economy were heading Edinburgh's way.

Now, these winds have buffeted the whole Fountainbridge development and left the whole dream in tatters.

First, the consortium behind the Springside development to the north of the site announced that the second phase of its plans were on hold.

The consortium, which comprises Grosvenor, AMA and, crucially, Royal Bank of Scotland, has so far said only that the second phase is on hold as a result of the downturn in the economy. It is not known yet whether part of the issue relates to its funding arrangements.

Across the road at the former site of the Tartan Club, the brewery social club where workers used to meet at the end of a shift for a pint and game of dominoes, it is the withdrawal of funding by RBS that has ended a vision for a "brand new thoroughfare" of 171 homes, office and retail space and underground parking.

And next door is a huge 12-acre site that HBOS bought last year. It had planned to create an office hub, with all its city locations apart from The Mound integrated on to one site. Now, that development is in doubt following the takeover of HBOS by Lloyds TSB.

So, with the three main sites in Fountainbridge now lying largely empty, does that mean that the ambitious plans for the area are now consigned to history?

Not so, according to local councillor and city Labour leader Andrew Burns, who believes that the long-term opportunity of the site will ensure it is still developed appropriately.

Although admitting that it was "disappointing" news that Buredi had been forced to shelve its plans, he said: "That site, and the whole Fountainbridge area, is less than a mile away from Princes Street. It has enormous potential and I would hope that other developers will take the plans forward.

"I would hope the administrators (of Buredi Fountainbridge) will be able to now find a buyer who will build something of benefit not just for the business community but also for the residents of Fountainbridge.

"However, I do appreciate that, given the current climate, finding that buyer is going to be a demanding and difficult task."

On the HBOS site, it is a slightly different story. Whether the new Lloyds Banking Group has an appetite for building a giant new flagship office complex is doubtful, especially since it is trying to cut back on costs and has come under partial State control.

What might be most likely is that the new group will choose to integrate some of its offices on to parts of the site in order to cut long-term costs. Further down the line, it could still choose to sell on parts of the site to other buyers. Indeed, the company even said last May as it clinched the deal to buy the land that it might not retain the whole site and may look to sell off parts for others to develop.

However, given that the value of most land is likely to have plunged by up to 50 per cent in the last year, any sale would also result in massive losses on the site.

So what is most likely, according to Stewart Taylor, a director at property firm CB Richard Ellis in Edinburgh, is that Lloyds will simply hold on to the site for now and make a decision later.

"HBOS will want to sit on it because it won't be worth anything like what they paid for it, but it will still be of value to them further down the line," he said.

What it means for the site is that development will be delayed, as opposed to cancelled. It is land of great value and Edinburgh will still require new residential and commercial development.

Once the market settles, there is no doubt that there will be demand for the Buredi site. And it will not be in the interests of either the Lloyds Banking Group or developers of Springside to leave land sitting empty for years.

Pretty soon, there should be quite a bit of activity taking place again in all corners of the old brewery site.