Westfield’s Global Retail
Westfield continues to grow worldwide. The company’s operations and new developments in the United Kingdom show futuristic designs that the company is applying globally.
Randall Shearin

Since entering the U.S. in 1977, Australia-based Westfield has been a strong player in the mall sector here. The company has continually acquired centers in the U.S. and abroad, forming one of the first global retail real estate companies. Today, Westfield’s U.S. portfolio of 59 centers is one of the most forward-thinking in terms of design and leasing. The company, who is the top mall owner in California, develops ideas in its portfolio and spreads them worldwide.

Recently, Shopping Center Business visited the United Kingdom, where Westfield now owns seven centers and has three major projects under development, to see firsthand how the company is sharing ideas across the world.

Entering the U.K.

Westfield, which is headquartered in Sydney, Australia, and has its U.S. headquarters in Los Angeles, had decided to make a play in the United Kingdom in 2000. It set up an office and began acquiring existing centers and companies to create a property portfolio. By 2005, the company had invested £2.1 billion (about US$4.2 billion) in acquisitions in the U.K. Its London operations, which had five employees in 2000, now employ more than 700 people.

Westfield studied the European market closely before making any investments. Common language, the legal system and planning regimes made the U.K. an attractive place to invest for the company.

“If you look at the U.K. from a retail supply standpoint, it has about one-third of the retail floor space of the U.S., and about half of Australia,” says Michael Gutman, CEO of Westfield’s United Kingdom operations. “From a macro perspective, the U.K. is significantly undersupplied in terms of quality retail space.”

Westfield has 10 sites or centers in the U.K. for a population of 60 million people. In Australia and New Zealand, the company operates 50 centers for a population of 23 million.

“There’s an opportunity here because the market is undersupplied,” says Gutman.

To help drive the success of its U.K. business, Westfield has imported a number of its top executives from the U.S. and Australia to lead new developments and leasing efforts. The company currently operates seven regional centers in the United Kingdom -— five in England and two in Northern Ireland. In addition, Westfield has two major developments underway in the London market, and one in Bradford, West Yorkshire.

“While the U.K. is a relatively new business for us, we’ve come quite a long a way in a short amount of time,” says Gutman. 

To get a foothold in the market, Westfield made several acquisitions in the United Kingdom. The company first acquired a 75 percent stake from Hermes in Westfield Broadmarsh, a center in Nottingham. It followed that purchase with the acquisition of a 50 percent interest in six centers located across the country from MEPC.

First Project Open

The interior of Westfield Derby, the company’s first development in the United Kingdom. Located in the East Midlands, about 90 minutes north of London by train, the center has a feature common in the U.K.: two-story inline retailers.

In October 2007, Westfield opened its first development in the U.K., Westfield Derby, in the East Midlands. The center is the result of a partial redevelopment of a center that Westfield acquired as part of the MEPC portfolio. Located about 90 minutes north of London, Westfield Derby serves a population area of about 1.3 million people. The center is anchored by department stores Debenhams and Marks & Spencer, and a 12-screen theater, Cinema de Lux. One of the innovations Westfield has introduced at Derby is two-story retail in the mall via a mezzanine level. In the U.K., there are a lot of “mini-major” tenants like Mexx, Top Shop and Next, and Westfield has accommodated their large formats with two-story in-line space. The double level stores allow the retailers to have a dramatic presence at the center without taking up too much frontage along a single corridor.

At Westfield Derby in the East Midlands, the dining terrace is an upscale food court that Westfield pioneered at its Bondi Junction center in Sydney in 2004. Similar dining terraces have since opened in the U.S. at Westfield Century City, Westfield Topanga and Westfield San Francisco Centre. Westfield is integrating the concept into select centers across the U.S. portfolio in remodels.

The center is designed with a central corridor that forms a square around shops in the center. Other shops line the exterior, some of which have windows to the outside world. The center is built around the parking deck, which rises six levels to a height that is above the highest level of the mall. The concentrated design allows for the center to sit on a relatively small piece of property and still provide 3,700 parking spaces. Because the center sits at the center of the town of Derby, residents from across the borough and beyond make it a part of everyday living. Westfield Derby is an incredible success. Westfield and its partners spent £340 million (about US$680 million) on the center’s redevelopment, which now sees between 600,000 and 700,000 visitors each week. The center’s redevelopment has also been a catalyst for other development in Derby. New hotels and restaurants are also being added to the city’s center.

Westfield has also taken a version of its dining terrace to Derby where the traditional U.K. food court concept has been replaced with Westfield’s unique approach to shopping center dining. The dining terrace is an upscale food court that Westfield pioneered at its Bondi Junction center in Sydney in 2004. Similar dining terraces have since opened in the U.S. at Westfield Century City, Westfield Topanga and Westfield San Francisco Centre. Westfield is integrating the concept into select centers across the U.S. portfolio in remodels.

Another amenity that Westfield is adding to the U.K. is valet parking, something that is common at malls in the U.S. and Australia — and that Westfield has improved upon by adding premium services — but not currently found at regional centers in the U.K.

“Right now, we are ‘exporting’ and introducing a number of concepts to the malls in the U.K. that originated and/or were refined in the U.S. and Australia,” says Peter Lowy, CEO of Westfield’s U.S. operations and group managing director of Westfield worldwide.

In the U.K., meanwhile, Westfield has a substantial redevelopment program underway for some of the centers it has acquired. Westfield Derby is the first project that the company redeveloped. Westfield essentially rebuilt most of the old center and developed an entirely new center on the site while successfully trading the existing center throughout the duration of the redevelopment, working with city and regional governments to change ordinances in order to do so. Next on the company’s list is the Broadway development in the center of Bradford, located near Leeds, then the Broadmarsh development, located in Nottingham, in the East Midlands. Westfield’s 1.2 million-square-foot Broadmarsh will sit on three levels and is anchored by three department stores, including Debenham’s and Marks & Spencer. The £700 million (US$1.4 billion) redevelopment of Westfield’s Broadmarsh will begin in 2009. When it’s complete, the center will be renamed Westfield Nottingham and will contain 220 new stores. Like Derby, Broadmarsh is serving as a catalyst for other redevelopment efforts in Nottingham.

New London Projects

The futuristic design of Westfield London features a glass roof and wide promenades throughout the center.

Westfield’s headquarters is located in central London and Westfield will open its first development in the capital later this year, in time for the holiday shopping season. Westfield London is the highly-anticipated urban retail project on the city’s west side. While the project itself has been underway since the early 1990s, Westfield became its developer in late 2004. Later, it bought out other investors to take its equity in the development to 50 percent (alongside Commerz Real of Germany) and in August 2006 Westfield took over as construction manager of the project as well. The complexity of the site involved creating a 16-lane underground siding for one of London’s main subway lines, together with major road works and the construction of three railway stations — two on London’s subway network and one on its over ground network. The site work for the property began in 2002 and has progressed rapidly since Westfield took over to manage the site.

Westfield believes that Westfield London will be the company’s most advanced project to date. While the center is largely enclosed, the design, which features a unique glass roof, makes it feel like an open-air center and also includes an outdoor pedestrian area known as “Eat Street”, which will be lined with about 18 sit-down restaurants and bars enabling visitors to enjoy the center’s retail and leisure mix throughout the day and into the evening. Cinema De Lux, a concept by National Amusements, will anchor the entertainment component of Westfield London with a 14-screen cinema. There is a 4,500-car parking deck that sits underneath the center on three levels.

The 1.4 million-square-foot center is anchored by Marks & Spencer, Debenham’s, House of Fraser, Next and Waitrose. The leasing is being themed according to areas. One area, called The Village, will hold high-end luxury retailers, including Louis Vuitton and others, like those found on London’s Bond Street. This part of the center was designed by New York-based architect, Michael Gabellini.

Leasing for the center has been incredibly successful. Retailers locating in London have been forced into older streetfront buildings, which often can’t accommodate their ideal size and design. At Westfield London, retailers are able to lease space that is the correct size for their prototype. Because Westfield London will introduce a whole new concept in shopping center retailing, tenants are demanding iconic spaces at the center to showcase their brands and make a presence.

Westfield London’s design is unlike that of any other center. The main promenades are incredibly wide. The roof of the entire common area is made of glass panels laid in a geometric pattern. These panels allow natural light to flow through while intrinsically creating an amazing effect of the center’s design.

London is not known for enclosed regional malls, so it is anticipated that the center will draw people to the area from the entire western half of the city and beyond. Just to one side of the center lie Holland Park and Notting Hill, two of the premier residential districts in London. The center is expected to employ around 7,000 people when complete.

About 50 percent of customers traveling to Westfield London will arrive by public transportation — the center will have four subway stations and a major bus interchange on its premises. This is something that Lowy would like to see more of at malls in the U.S.

“One of the most unique factors of U.K. retail is how any people use public transportation to get to and from the center,” says Lowy. “We successfully integrated the BART station into Westfield San Francisco Centre. But in America, I’d like to see more people traveling by public transportation to shopping centers, and to do that, we have to have stations integrated into the center to make it convenient.”

Westfield Stratford City, located in East London, is a mixed-use project that will contain 1.5 million square feet of retail, plus 400,000 square feet of restaurants and leisure retail. Other uses at the center include office buildings and several hotels.

The second new project that Westfield is developing in London is Westfield Stratford City, located on the east side of the city. Westfield acquired the 180-acre site as part of a portfolio acquisition in late 2004 and the original plans were for a much smaller-scale development. When London won the bid for the 2012 Olympics, however, Stratford suddenly took center stage and the project’s proximity to the 550 acres that will house the games’ main venues makes it the ideal location for a mixed-use development. Westfield Stratford City is designed as a mixed-use project that will serve as a focal point for east London.

Like Westfield London, Stratford will have a high street area containing top brand retailers. A three-level concourse of shops will connect the two anchor stores, John Lewis and Marks & Spencer. Both anchors will be among the largest that the retailers operate in the U.K. In all, there will be 1.5 million square feet of retail, plus 400,000 square feet of restaurants and leisure retail. Other uses at the center include office buildings and several hotels.

There has been very little retail development in east London over the past 30 years. The newest regional center, Bluewater, is about 9 years old and sits 35 miles east of Westfield Stratford City. Westfield estimates the non-food disposable income in the primary trade area of 2 million people to be about £5.9 billion (US$12 billion). The primary trade area is incredibly dense. In the U.S., there would be four or five centers in such a trade area. It is comparable to having the only mall in the city of Los Angeles. In addition, the center will be home to a new junction of the subway system, which is anticipated to be the fourth busiest in the city. There will also be a train station for the lines running through the Channel Tunnel to Brussels and Paris. Because of these factors, Westfield Stratford City has been able to catch the attention of all the major retailers and restaurants actively looking for space. They are so excited about the project, reports Stratford City Director John Burton, that they are flexible about where they are located within the plan — as they see every location in the center as adding strength to their brand.

Because this center is so different, Westfield has brought in employees that have worked on other high profile centers across its global portfolio, to consult on Westfield Stratford City. A team of seven regularly reviews plans and leasing efforts to ensure success. The company believes it is a shining example of how the company can work globally and focus on a single project.

“There has been a surprising amount of cooperation and movement between the markets, and that will only escalate as the project opening draws near,” says Gutman.

CACI has forecasted that Westfield London and Westfield Stratford will be the Number 1 and Number 2 regional malls in the United Kingdom.

Leasing

Leasing is made slightly easier in the U.K. because all of the leasing is done through agents, similar to landlord representation firms in the U.S. The same firms also represent retailers. This allows for a free flow of information across retail companies. That’s an advantage. A disadvantage, of course, is that an agent knows what the costs are for all tenants that it represents, including those locating in the same center. For Westfield, this system enables the company to employ about half the staff for leasing that it would in the U.S. or Australia.

Since Westfield has such a large redevelopment pipeline in the U.K., it has garnered a lot of interest from tenants in the country. Marks & Spencer is one anchor tenant that has a great relationship with Westfield. The store is anchoring the redevelopments of Westfield Derby, Bradford and Broadmarsh, and will anchor Westfield London and Stratford City. John Lewis and Debenhams are other anchor retailers with which Westfield has also cultivated very strong relationships.

Inline retailers, meanwhile, have consolidated in the U.K. over the past 8 years. Instead of having eight or nine small stores in a single market, they now locate two or three larger units. A lot of these stores are the mini-major tenants like Next and Top Shop that are lining Westfield’s redevelopments. Newer expanding tenants to the U.K. market, like H&M and Zara, are also adopting that strategy. Westfield’s timing is good, as a lot of European and U.S. retailers have entered the U.K. market in recent years.

A major difference that Lowy likes in Westfield’s U.K. portfolio is the number of food offerings found in the U.K. At Westfield London, for instance, there will be about 50 food offerings, ranging from grocery stores to stands to sit-down restaurants. That’s much more than any of Westfield’s centers in the U.S.

Because of the older buildings in the U.K., retailers there have figured out how to use vertical space. Since vertical space works better for the developer in a mall environment, Westfield has created a lot of two story retail spaces in its U.K. centers, such as Westfield Derby. It is having a lot of success with the spaces, and retailers like the presence it gives. Westfield is having so much success, in fact, its U.S. leasing and design teams are considering implementing it in some of the portfolio here.

Future Plans

Following the completion of Westfield London, the company is also in the planning stages of redevelopments on its centers in Guildford, Merry Hill and Bradford. Westfield Bradford will be similar in size and scope to Westfield Derby, with Debenham’s, Marks & Spencer, and Next as anchors. Westfield has already begun site preparation works in Bradford and expects to commence redevelopment activity this year. Westfield Merry Hill is located in the West Midlands, about 40 minutes south of Birmingham, England. Over the last 3 years, Westfield has been working with the area government to get the district classified as a town center which will unlock opportunities to regenerate the whole area, as well as expanding and redeveloping the center. In January 2008 this zoning was granted, which will allow Westfield, and the local regeneration company it works very closely with, to go forward with the redevelopment program.

As with its portfolio in the U.S., Westfield has plans for remodels or complete redevelopments for most of its U.K. portfolio. If Westfield continues to grow at its current pace, Gutman anticipates that the company will have the Number 1 retail portfolio by size in the U.K. by 2012.

Development is incredibly tough in the United Kingdom. Complex zoning makes it difficult for a retail property to expand unless it is inside the boundaries of a town center. Most of Westfield’s projects lie within town centers, and it has been able to rezone several into town center boundaries. For that reason, Westfield has focused itself on the regeneration of town centers in the United Kingdom. All of the plans it is developing in the country are town center (urban retail) projects. 

For Westfield, coming to the U.K. is also about bringing its product, which is different than current shopping centers in the country, to the market. The company has introduced its brand to the market, as it has in the U.S., by adding its Westfield moniker to every center. Already, in the White City area of London where Westfield London is being developed, residents have begun to refer to the area as being “near Westfield” and in Derby, the new redevelopment is known by the majority of its shoppers simply as ‘Westfield.’

“We’ve been greatly encouraged by the adaptability and relevance of our business model here,” says Gutman. “That’s been proven by what we’ve done at Derby. We’re excited that we can bring our expertise here and merge what we know in the U.S. and Australia and adapt it successfully to this market. We’re eagerly awaiting the opening of our next projects.”