Westfield Sydney … no renewal of leases yet.WESTFIELD, the world’s biggest shopping centre owner, has admitted rents are falling in its Australian centres due to weaker retail trading conditions.
New tenants will be offered rents up to 5 per cent lower this year, while tenants who are negotiating to extend their lease face moderate increases below the rate of inflation.
Westfield Group is considered the market barometer for mall landlords as it has interests in and manages 105 shopping centres across Australia, the US, Britain, New Zealand and Brazil, covering more than 22,800 retail outlets, and has total assets under management of $64.4 billion.
But any drop in rents is not expected to affect the tenants in the flagship Westfield Sydney centre in Pitt Street Mall. Given Westfield Sydney is only two years old, the initial leases still have about three years to go.
Westfield’s co-chief executive Steven Lowy said on Wednesday that while renewals were flat, ”new leases are about 4 per cent to 5 per cent below leases at the previous expiries”.
When queried on the outlook for sales, Mr Lowy said they would be about 1.5 to 2 per cent. That rate of growth would be lower than this year’s 2.9 per cent, due to a combination of remixing tenancies, increased savings by households and low inflation, which would keep prices flat.
”There have been subdued retail sales in Australia for a number of years now and I suppose we are feeling a lagged effect,” Mr Lowy said. ”It’s fair to say the December  quarter was softer than we would have liked. But of course, we are pleased with a bounce back in January. Whether that continues or not … we can’t really predict that.”
Another reason for the forecast declines in rents is the rise in online shopping and less demand for bricks and mortar stores. To stem that tidal outflow, Westfield has created a new digital division, Westfield Labs, based in San Francisco.
”With so many shoppers now connected to mobile devices, we are well advanced with strategies to connect the digital shopper with our malls, including sophisticated car-park technology, concierge and lifestyle services, efficient delivery channels for retailers, and utilising social media and interactive advertising to better interact with consumers,” Mr Lowy said.
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