Cardiff may be bustling, and its bay may be the largest regeneration project in Europe, but critics have derided its architecture – partly because every building seems to think it's a boat. Local boy Peter Rees, head planner at the Corporation of London, returned to give his verdict.
The train hauls itself out of the Severn Tunnel under a low, lead-coloured sky. Minutes earlier, in England, the sun had been shining. We want to like South Wales – we really want to like it – but this is a bad start.

Soon, we are rumbling through the grey suburbs of Newport. "Not a good first impression for someone who might be bringing money to the town," says Peter Rees, his nose close to the glass. "Inward investors will arrive by train and we're looking at sheds, the back of a multistorey car park and some rather tired rows of houses."

Attracting investors is something Rees knows all about. He's chief planner for the City of London, where he oversees development in one of the world's richest urban districts. Property tycoons, global corporations and A-list architects beat a path to his door with their plans for gleaming skyscrapers and monster office blocks.

But Rees grew up in South Wales, and today he's travelling back to his homeland to cast a planner's eye over the region's attempts at regeneration. We're heading for Cardiff, where Swansea-born Rees lived as a student in the late 1960s and early 1970s, to look at Cardiff Bay, the biggest waterfront renewal scheme in Europe. We had intended to visit Newport on the way back but, from what we see through the train window, we decide against it.

"It's strange to see an urban centre with no cranes," says Rees, offering a running critique as we cross the muddy Usk and crawl through Newport's city centre. "The river bank is car parking and a major highway, cut off from the centre. There are plenty of flower baskets at the station, trying to cheer things up, but we haven't seen any architecture yet. Now we're going into the tunnel, and that's the end of Newport."

Cardiff is the next stop. From the railway embankment that divides the compact centre from the sprawling bay regeneration zone, it doesn't look any more promising. "The approach to Cardiff is only slightly less depressing," says Rees, gazing at the endless sheds on the estuarine fringes. "There's nothing distinctive. We could be anywhere."

Rees decides to take a detour round the centre before heading out towards the bay. Outside the station, he's soon spotting things he likes. "One of the things they've got right is that you come out of the train station straight into the main bus station. The station is right in the centre."

Looming in front of us is the Millennium Stadium. Its muscular trusses dominate the city and the metropolitan architecture critics hate it – but Rees is impressed. "It's good – quite gutsy; it's got engineering. I'm not sure about the coloured panels … but it's a powerful statement right in the centre of the city."

Even though it's only Tuesday, the streets around the stadium teem with shoppers. "You can quickly get an idea of the economy; there aren't many empty shops. We've seen very little high quality architecture yet every crack's got life bubbling out of it. It's a confident city, a working city, and it doesn't feel the need to build showy buildings."

We turn into Queen Street, the main shopping drag. "The funfair's in the main street. People are having fun. Maybe we need some of this in the City, some helter-skelters. Three slides for a pound!" Rees grabs a mat, sprints up the rickety steps and comes spinning back down with a grin.

There's plenty more to enthuse over. For example, the grand, white-stone Civic Centre, laid out in the prosperous pre-war years ("It really gives you the impression of a civic-minded city"); an 18th-century villa on Park Place by local architect William Burgess ("It's every bit the equal of a house by Frank Lloyd Wright"); and the covered Victorian market, stuffed with stalls selling cockles, E E towels and bacon butties. Rees loves it. "It's real; it's got identity. Everything about it is crude, but it works. It's full of activity, and that's more important than architecture."

Everything about it is crude, but it works. It’s full of activity, and that’s more important than architecture

Peter Rees

So far, the city has exceeded our expectations. But Cardiff has never been the blighted shell of popular imagination; since becoming the Welsh capital in 1955 it has successfully made the transition from an industrial economy to one based on administration, services, high-tech industry and media. Despite having a population of only 300,000, Cardiff attracts more inward investment than any other city in the UK and employment rates are above average.

"It's surprising the number of people who think there are still coal mines everywhere," says taxi driver Graham Nicholas, as he chauffeurs us down to the bay. "But I don't think they've been here, to be honest."

Nicholas seems an open-minded character, so we ask him if he's bothered about the way the Welsh are perceived by the English (writer AA Gill recently described them as "pugnacious little trolls" and television presenter Anne Robinson called them "irritating and annoying"). "I think the Welsh are used to having the mick taken out of them, to be honest," he says cheerily. "The economy's good. There are more cabs now than there ever were."

The bay is a mile from the city centre. On the way, Rees gives me a bit of history. A hundred years ago, when Welsh coal powered the world's industries, Cardiff's mighty coal docks were the busiest on the planet. The heart of the docks was Tiger Bay, a muddy tidal inlet around which a raucous community of Somalis, Yemenis and other exotic seafarers grew up. It got its name, Rees thinks, from the incoming tide, which ripped over the mudflats like a tiger.

The long decline began after the Second World War with the rise of oil, steepening during the 1960s and 1970s. In the end, the docks – and the name Tiger Bay – died.

In 1987, the Cardiff Bay Development Corporation was established and by 1992 a massive £2.4bn regeneration scheme was under way, turning the 27,000 wasted acres into a district of housing, shops, leisure and business. A £220m barrage was built across the mouth of the bay, creating a 500-acre freshwater lagoon, and the name Tiger Bay, synonymous with mud and immigrants, was replaced by the anodyne "Cardiff Bay".

Around the shore of the bay, a development of the highest quality was supposed to rise.

Yet Cardiff seemed to lose its nerve and allowed a string of world-class projects to flounder. Zaha Hadid's opera house was axed in 1995; Will Alsop's landscaping designs for the barrage were dropped a couple of years later; plans for a grand boulevard, linking the city to the docks, drawn up by celebrated Barcelona masterplanner Martorell Bohigas Mackay, were quietly shelved around the turn of the millennium. And last year, Richard Rogers was sacked as architect of the proposed Welsh assembly building.

"Cardiff lacks the imagination today that it had in the Victorian age and the early 20th century," says Rees, as the taxi pulls up beside Mermaid Quay, a bar and restaurant complex with a vaguely nautical theme. "It doesn't grab opportunities when they come along." There are people strolling along the waterfront eating ice creams and taking photos, although it's hardly busy. Our taxi driver says: "The bay is a bit of an outpost at the moment. The taxis don't come down here much."

"It's not as exciting and interesting as you'd like," says Rees, taking in the sweep of the bay. "A lot of architects can't get their minds around the fact that collections of buildings don't make places – this could be anywhere. The artwork and landscaping is actually quite good – look at that wooden decking, look at that water sculpture. But the buildings are absolute crap."

It’s a little bit like Terry Thomas’s teeth down here. There are great big gaps

Malcolm Parry

Construction is still going on. Sir Robert McAlpine is putting up the steel frame of the Wales Millennium Centre; Barratt is building a slew of modern apartments; Wimpey and Persimmon are filling the gaps between the city and the docks with mediocre housing.

"It's a little bit like Terry Thomas' teeth down here," says Rees' friend Malcolm Parry, who has joined us for lunch. "There are great big gaps." Parry has just retired as head of Cardiff's school of architecture and he was Rees' tutor back in the 1970s. He continues: "Everyone's rather sniffy about this area. Architecturally it's crap but it works quite well. It's where people congregate. Would I live down here? I think not, because it's not corner-shoppy enough.

"Notice that everything is prowed," he adds, pointing to the ship-like protrusions on the St David's Hotel, the Atlantic Wharf Leisure Village and practically everything else in sight. It's as if the buildings are desperately trying to remind you that this was once a place connected to the sea. And with good reason: since the completion of the barrage in 1999, the bay has become a featureless lake, lacking tides, mud or shipping. As a body of water, it has all the charm of the Staines Reservoir.

Over lunch at Woods Brasserie on Mermaid Quay, Rees and Parry debate what they have seen. Rees is concerned that the huge bay regeneration project will suck the life out of the vibrant centre. He feels that it would have been better to have built the stadium on the bay and put the opera house (or its replacement, the Wales Millennium Centre) in the city centre. "If I'd been chief planner, I'd have tried to do something different in the bay. The essence of the centre is that it's compact. It's been constrained by barriers like the river, the railway, and that's been it's great strength. If you then want to double the size of the city by taking in the bay, you're diluting that. The danger is not just that the docks will fail, but that it will take the rest of Cardiff with it."

However, Parry believes that the stadium has ensured the survival of the centre. "The stadium is crammed in the middle of the city. When there's an event on there, the city has to party – it doesn't have any choice. The reason they wanted either the opera house or the stadium is they wanted an iconic building. I have to say it depresses me as an architect – it's revolting, vulgar and trashy – but it's given the city what it wanted."

Cardiff's dilemma is that it is both a capital city with international ambitions and a modest regional centre serving a provincial hinterland. With the first in mind, the city fathers have attempted to develop the bay using a fish-flavoured transatlantic regeneration template (think New York's Pier 17 or San Francisco's Fisherman's Wharf) with a bit of Barcelona's architectural flair thrown in. But it has been carried out with little conviction and the results sit uneasily with the organic charm of the centre.

It's probably the gap between promise and reality that has led critics to give the city's efforts such a rough ride. "Quite why Wales is so against some of the world's best architects and why it has encircled Cardiff Bay with second-rate design when it was offered the best are questions that its assembly might care to debate," wrote Guardian architecture critic Jonathan Glancey last year. "In the meantime, architects worth their measure should steer clear of Cardiff."

But as other critics have pointed out, Wales is a historically pastoral country that has no indigenous tradition of civic design (urbanisation came late and without much thought during the Klondike coal years) or architecture. Nor, until recently, did the Welsh show much interest in their own language and traditions. But that is changing. "Inside Wales, being Welsh is now fashionable," says Rees.

The £105m Wales Millennium Centre now rising on the bay was designed by Jonathan Jones, of Cardiff practice the Percy Thomas Partnership. It will be a bold attempt to define Welshness in built form. For a start, it does not have prows: instead, it takes the form of a hulking carapace decorated with Welsh verse and clad in slate strata.

There's a mock-up of part of the facade in front of the site; Parry applauds the attempt but Rees is not impressed: "It's Marmite heritage – a thin spread of heritage on a thick lump of bread. It's canned Cymru, and Welsh doesn't come out of an aerosol can."

On the train back to London, Rees sums up his feelings about the city. "I'm proud to take people to Cardiff; it's a beautiful, usable city that is better than many in the UK. The bay fails to excite me but I'm realistic about it. They've achieved a great deal with a fraction of the money that I have at my disposal in the City of London, so well done. The urban design and artwork is very high quality."