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Fairy Bower took its name from the romantic qualities of the rocky bushland gully and creek that once ran down from Manly's Eastern Hill to Cabbage Tree Bay. This creek ran from a hanging swamp where College Green now lies, under what is now Bower Street and out along what is now Bower Lane to the once sandy beach at Fairy Bower. There may well have been an earlier Aboriginal presence: in October 1862, human remains were found by a boy in bush between the Quarantine Ground and Fairy Bower. Cabbage tree palms were once found in the Shelly Beach area nearby.
Businessman Charles Hemington obtained a lease on 1 January 1858 of eight acres (3.2 hectares) along the cliffs at a rent of £60 a year and advertised his 'fledgling Fairy Bower' picnic, entertainment and refreshment area. A Sydney Morning Herald article mentioned Fairy Bower in its report on the holiday crowds that flocked to Manly:
The attractions at Manly [include] a recently formed bower, called Fairy Bower, beautifully situated, near the ocean beach, and surrounded by rock, wood and overhanging foliage. 
In May 1859 Hemington advertised:
The unbounded success which has crowned the efforts of the proprietor of this enchanting spot … renders it unnecessary to make any further comment on the beauty and advantages of the place … Those who have not been before will please to turn to the right on the long beach in front of the sea, and ascend the white steps and four minutes' walk will take them to Fairy Bower. 
Thomas Newman, a carpenter, obtained a lease on 30 December 1857 at the ocean end of what became Ashburner Street, near the rock-carved steps to Fairy Bower, where he set up a rival picnic and refreshment area named 'Fairy Nook'. For several years large crowds were drawn to the area on public holidays. Hemington claimed the patronage 'of all the Elite of New South Wales' .
The Fairy Bower changed hands several times in the 1860s, together with its 12-room weatherboard hotel. During April 1868, when the hotel lay empty, it burned down. 
From the late 1860s, the only family living at Fairy Bower was the Sly family of fishermen, but on 28 April 1877, sales of the Bassett-Darley Estate began, following the passage of enabling legislation through the NSW Parliament. Fairy Bower and its sandy beach between Reddall Street and Cabbage Tree Bay comprised section 7 of the estate. The land currently fronting Fairy Bower Road comprised section 16. The 10 acres (4 hectares) contained in section 7 were sold to J Jones, and portion of section 16 was sold to the Ponton brothers, quarrymen. The Pontons may have used their four acres (1.6 hectare) as a quarry, hence the name, Quarry Street, the earlier name for Fairy Bower Road.
The current location of Fairy Bower Road was first laid out as part of 'The Heights of Manly' subdivision, auctioned in 1880. The subdivision ran between Darley Road and the proposed Quarry Street and included what became Vivian Street. The auction of these 23 lots relatively distant from Manly Wharf was not a success. The entire area was offered for auction again in 1904 as 'Vivian's Subdivision', with 26 lots including some immediately adjacent to the 'Cardinal's Palace Grounds' (St Patrick's Estate).
In the late 1890s, Marine Parade, a popular walk from South Steyne past Fairy Bower to Shelly Beach, was constructed.
By 1908, Fairy Bower Road still had only two houses, but by 1914 there were 13, and 21 in 1918. In the 1920s Arthur Griffith, JP, member of the Legislative Assembly, Chief Secretary in the Holman Labor government, lived at Fairy Bower Road at his house Sturtholme.
In 1928, on one of the lots subdivided from the Hawthorn estate in 1908 (named after the mansion Hawthorn, built for Thomas Littlejohn, member of the Legislative Council), Fairy Bower Road's first residential flat building was built.
Between the wars, a small fishing fleet operated from Shelly Beach. On Fridays, motor trawlers would bring in their catch for gutting and boxing at Shelly Beach, bringing sharks into Cabbage Tree Bay. An open-air pool – still popular – was constructed, and there was a gym at Fairy Bower, on Marine Parade near Bower Lane.
After a long community campaign against further subdivision of the St Patrick's Estate, the New South Wales Government allowed subdivisions between Fairy Bower Road and Reddall Street (College Green), between the College and Bower Street, behind the College and between the Cardinal's Palace and Spring Cove. On one portion, Bear Cottage – New South Wales's only hospice for terminally-ill children and their families – was opened in April 2001, at 2 Fairy Bower Road.
Fairy Bower remains an attractive and desirable part of Manly, with a varied streetscape including Federation semis and cottages, 1920s Arts and Crafts-style bungalows and villas, and 1920s and 1930s residential flat buildings.
Cabbage Tree Bay is a 'no take' aquatic reserve; it is the only west-facing beach on Australia's east coast. Off the Shelly Beach headland is the famous surf break known as 'the Bower'.
Terry Metherell, Bower Street, http://www.manly.nsw.gov.au/Street-Histories.html
G and S Champion, Manly, Warringah and Pittwater 1850–1880, Killarney Heights NSW, 1998