Westfield tenants receive 5% rent reduction due to slow retail conditions

Specialty tenants in Australian Westfield malls signing new leases have scored an average 5.1% rent reduction than the expired rents, according to the Westfield Group’s March quarter update.

380 leasing deals were completed over the first three months, across the shopping centre group’s portfolio of 38 malls in Australia.

Excluding new projects, these leases represented 2.2% of specialty retail space across the Australian portfolio.

Specialty stores range from hair and nail salons, to fashion boutiques and apparel chains.

The rent reductions were offered against a subdued retail backdrop with specialty sales up just 0.3% for the quarter.

Westfield reported that the timing of Easter as well as 2012 being a leap year negatively impacted retail sales in the quarter.

“Whilst retail conditions remain subdued the productivity of the portfolio remains high at $9,863 per square metre (psm) with continuing demand for space from both domestic and international retailers,” said Westfield in its quarterly update.

Despite these slow conditions in Australia’s retail space, the Group’s overall global operations over the first three months of this year were in line with expectation, according to the report.

During the quarter, Westfield commenced $700m of new projects including the $400m redevelopment of the Westfield Mt Gravatt in Brisbane (above), the US$150m redevelopment at Garden State Plaza in New Jersey and the US$90m redevelopment at Montgomery in Maryland.

The Westfield Group also entered into an agreement with O’Connor Capital Partners to form a US$1.28b joint venture that comprises a portfolio of six regional Westfield malls in Florida.

The Group also decided to dispose of its joint venture interest Brazil, however it continues to review opportunities in the South American market.

Leasing demand in the United States remains solid with over 330 deals executed in the three months representing over 843,000 square feet.

Average specialty rent, as of 31 March 2013, was up 2.6% to US$65.05 per square foot (psf), for the 12 months. Growth over expiring rents for all deals, excluding projects, was up 18.0% for the quarter.

The strong performance of the UK’s Westfield London and Stratford City continues with retail sales for the March quarter up 2.6% and 7.7% respectively. Combined annual sales from the two London centres is now in excess of  £1.9bn.

Westfield's global portfolio comprises 100 shopping centres in 4 countries with around 22,000 retail shops, 1.1bn annual customer visits and over $40bn in annual retail sales.

The global portfolio at 31 March 2013 was 97.4% leased, up 20 basis points compared to the same period last year.

The Group expects to commence between $1.25bn and $1.5bn of new developments in 2013 (WDC share: $300m-$500m).