Westfield tipped to open more US centres

2 Nov 2012, 5:43 pm   -   Source: AAP
Shopping centre giant Westfield expects to start up to $1.5bn in new developments in fiscal 2013. (AAP)

Shopping centre giant Westfield expects to start up to $1.5bn in new developments in fiscal 2013. (AAP)

Westfield Group is tipped to open a raft of new shopping centres in the US as retail improves, but Australian retailers are still feeling the pinch

Shopping centre giant Westfield is tipped to open a string of new centres in the US as Americans spend up while Australian retailers continue to struggle.

Local Westfield retail tenants are finding it tough to absorb higher shopping centre rents amid soft sales growth.

Westfield Group said it expects to start up to $1.5 billion in new developments in fiscal 2013 as it reassures the market that its United States shopping centres escaped major damage from superstorm Sandy.

The news came as Westfield delivered its latest quarterly trading update, which showed comparable specialty retail sales growth in the 12 months to September 30 was just 1.2 per cent in Australia, and 1.8 per cent in New Zealand.

"In Australia retail conditions remain subdued," joint chief executives Peter Lowy and Steven Lowy said in a statement on Friday.

Sales growth was strongest in Victoria, Queensland and Western Australia, while sales fell in South Australia and the ACT and were flat in NSW.

Despite weak conditions in Australia, Westfield centres remain 99.5 per cent leased.

But analysts said the high occupancy rate could mask incentives given to tenants to allow them to keep their stores open during the difficult trading conditions.

Westfield has 49 major shopping centres in Australia and New Zealand, which it owns in a joint venture with its property investment arm Westfield Retail Trust.

It has 47 centres in the US, and several in New Jersey, New York and Connecticut where superstorm Sandy has caused severe damage.

"Thankfully our centres on the east coast which were affected by Hurricane Sandy did not sustain any major damage," the Lowys said.

The majority of centres were operational within 12 hours of the storm passing.

Comparable specialty retail sales in the year to September rose by 8.4 per cent in Westfield's United States portfolio, and by 14.5 per cent in Brazil.

Leasing demand at the new World Trade Centre in New York was strong and the performance of Stratford City in the UK had been outstanding, the group said.

It also confirmed its forecast of a 49.5 cent distribution per security in 2012.

Westfield Retail Trust confirmed its forecast of a distribution of 18.75 cents per stapled security.

Westfield shares closed one cent, or 0.1 per cent, lower at $10.58.

CBA analyst David Lloyd said occupancy rates in the Australian portfolio reached a record high but the retail environment remained tough.

"Retailers are suffering from already high rents so we believe we'll continue to see negative releasing spreads across Australian assets simply because retailers cannot absorb higher rents," Mr Lloyd said.

Better consumer conditions in the US resulted in positive releasing spreads and rental growth as occupancy costs pulled back to 2007 levels.

"We'd expect that to continue," he said.

"We anticipate more stores opening than closing in the US this year and potentially more development activity."

He said Westfield would be able to increase rents at a faster pace than the past five years.

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