St Leonards has caught the regeneration bug from its neighbour, Hastings. Stephen Emms reports

It's one of those blue-sky days when anything seems possible. I'm standing in the last surviving junk emporium in St Leonards-on-Sea's haughtily named Mercatoria, as 1930s Parisian café music blasts from a stereo which rattles on a chair. Irish owner Eamon is showing me his homemade "souvenir" T-shirts. "Don't be scared," reads one, "spend some money in St Leonards." Another quips: "Don't be scared, I'm from St Leonards too."

"Obviously they're a joke because it's changed beyond recognition," Eamon says, with a smile, "but there was an air of despondency when I moved here 10 years ago – and I liked that."

I quickly learn that everyone here has an opinion on regeneration. St Leonards, alongside the adjoining Hastings, formerly one of the most economically deprived districts on the south coast, is undergoing a revival of which many seaside towns can only dream.

Hastings has been on the up for some years now, its hilly Old Town, bucolic cliff-top parks and pedestrianised George Street attracting both creativity and London wealth. St Leonards' rise has been slower: a grandiose, purpose-built resort founded by 18th-century architect James Burton, who had developed large areas of Bloomsbury and Regent's Park, it attracted artists and writers including Turner and Rossetti, as well as the super-rich, in its heyday, but declined sharply in the 1980s and 1990s, and has begun to recover only in the past couple of years.

"St Leonards has an art college, and its natural beauty has always attracted an artistic following, but there weren't any outlets," says Max O'Rourke, proprietor of the stylish Zanzibar International Hotel, which opened in 2005. "Our defining moment was the granting of £400m in 2002 by the European fund, which allowed development of social projects, galleries and buildings such as the Marina Pavilion."

And the just-opened Marina Pavilion certainly looks the part, with beach bar, entertainment venue, and state-of-the-art beauty clinic, although its glass restaurant, Azur, is rather soulless. Directly opposite, however, in the units at the base of Marine Court, the grubby 1930s ocean liner-styled apartment block, a clatter of potteries, bars and galleries jostle for attention.

I head first to the Arts Forum, a non-profit organisation founded in 2003, whose shows – which have featured 200 of its 750 members – change every two weeks. Quixotic chairman Alastair Fairley says: "There's an amazing energy here. Some years back a few of us decided to get things organised, and now there are hundreds of us, all pulling in the same direction. We've opened galleries, run festivals and events, and soon the new Jerwood Gallery will take it up another notch. Everyone knows an artist here – it's no big deal."

Moreover, it seems everyone here is an artist. I'm in town for the launch of the film festival Shot by the Sea, so that evening, I'm off to the party at the Sealife centre on Rock-a-Nore, the fishermen's beach in Hastings, where stylish young things proffer suggestions of unmissable galleries and bars. The top tip is the offshoot of Shoreditch institution the Dragon Bar, in George Street, with its battered seats and locally sourced food, but other Hastings must-sees include the installation space Stonesquid, Pomegranate Food & Drink House, the tiny independent cinema Electric Palace, and the art space 12 Claremont, where, bleary-eyed the next day, I chat to an elderly lady with silver eye shadow and shopping trolley, who is studying a projection intently. "What do you do?" I ask. "I'm an artist," she responds, a touch wearily.

But if there's only so much art you can take, Hastings and St Leonards brim with quirky shops, too, perfect for a Saturday afternoon mooch. Hastings Old Town's attractive boutiques include local craft haven Made in Hastings and the enviable Judges deli and bakery, run by Green & Blacks founders Craig and Jo Sams. "We have a very live-and-let-live community," says Jo. "Everyone knows what everyone's doing and nobody gives a damn."

Over in St Leonards, Norman Road – which some glossies have termed "the new Portobello" – is a characterful climbing terrace of peeling pastel shops and galleries. I explore the cavernous Eras of Style, at No 32, which specialises in period furniture, and whose owner Andy suggests that the Old Town is a bit "old hat, whereas St Leonards is like old Brighton, a well-kept secret". The retro Why Interiors is run by Aaron and his mum Sandra, who fled Lambeth eight years ago; they say Norman Road is "exploding". And McCarrons, at No 64, is a craft outlet opened by two ex-actors, Rachel and Justin, who "fell in love with the road first; how could you not?"

Despite the regeneration, the boutique hotel scene, unlike Brighton, is still in its infancy. The acclaimed Zanzibar aside, I adored Swan House, a five-star bed and breakfast in a medieval house, sitting up the hill in the Old Town, with its contemporary rooms, artisan touches, tropical decked garden and superior breakfasts. And while the restaurants along George Street are lively but inconsistent, I devoured a sensational meal of crab and sea trout at Michelin-rated St Clements in Mercatoria, run by ex-Caprice chef-patron Nick Hales.

Before I leave, I sit on the vast shingle by the fishing trawlers, watching the pulsating throats of seagulls in their battle cry, the glare, reflected in the green sea, almost blindness in the early afternoon. I glance back at the jumble of painted houses. Those 19th-century artists were right: Hastings just drinks the light.

Compact facts

How to get there

Swan House (01424 430014; swan ) offers B&B in a double room from £115 per night.

Zanzibar International Hotel (01424 460109; zanzibar ) offers B&B in a double room from £99 per night.

St Clements Restaurant (01424 200355; ) offers a set menu from £14.50.

Further information

The Arts Forum ( );

Electric Palace ( electricpalace );

Stone Squid Experimental Art Space ( );

Pomegranate, 50 George Street; McCarron's of Mercatoria ( ).