Walking down the heaving, brightly lit main mall at Stratford City shopping centre last week, Sir Philip Green was overheard saying: "There must be a lot of people out of work here."
His gruff, dry statement was in response to the 200,000 people that descended on the shiny centre for the biggest show in east London this side of the Olympics – the unveiling of the £1.7bn behemoth that is Westfield Stratford City.
Green may have been right. Despite the huge numbers milling around the beautifully made shops last Tuesday, only some appeared to be leaving with bags – many had come just to enjoy a day out rather than on a serious shopping mission.
Chicken shops KFC and Nando's had queues round the block, the West Ham United shop was mobbed, and Forever21 had a huge queue because the US retailer was giving away free clothes.
But all right noises were being made: The centre opened to the sounds of US pop star and former Pussycat Doll Nicole Scherzinger. Shortly before her turn, Sir Philip, alongside other retail bosses, such as Marc Bolland of M&S and John Lewis's Charlie Mayfield, cut the ribbon to mark the official opening of this 1.9m sq ft shopping mecca which has 300 shops – along with 70 bars and restaurants.
Detractors of the new centre have questioned the sanity of opening Europe's largest shopping centre at a time when consumers are counting every penny. Even industry success story John Lewis has revealed that it's hurting – it posted an 18.2 per cent fall in pre-tax profit to £90.4m in its interim results last week.
But Australian developers Westfield have heard such criticism before.
Cast your mind back to 2008. Across town in west London during bank bail-outs and a major banking crisis, Westfield successfully opened its first London megalith of consumerism – the Westfield London shopping centre, which stands at 1.6m sq ft.
Michael Gutman, the UK managing director of Westfield, says: "These large projects have massive lead times. But most importantly a project like this isn't built for 2011, it is built for decades to come. Of course it will go through different economic cycles ... At Westfield London we opened in the teeth of a crisis. But we have seen double digit growth in the three years we have been open."
Westfield's boss, Frank Lowy, 80, has had his fair share of tough breaks, he survived war-torn Europe and escaped to Australia via Israel, where he fought in the Arab-Israel war.
Having worked in property development since the 1950s, Lowy, and his two sons, know about shopping centres. The group has invested in 124 centres around the world and has been planning the development of the Stratford centre since taking control of the wasteland site in 2004.
But without commitment from retailers, such centres just do not get built. Ciaran Bird, the head of UK retail at CB Richard Ellis, was involved in leasing the centre. He says: "Many so-called experts doubted that a scheme of this scale would be more than 50 per cent let on opening. So to have delivered a scheme that is over 95 per cent let with a quality and diverse tenant mix is phenomenal."
This week is the annual knees-up for all the people behind shopping centres and high streets up and down the country: the BCSC Conference & Exhibition. More than 2,500 people are due to turn up in Manchester tomorrow and – for two and half days – sign leases to open shops, negotiate deals to fund the development of retail schemes, or network and weigh up the state of their industry in the face of a very difficult downturn.
The past few years have been tough for the conference crowd – retailers have wanted cheaper rents and landlords have struggled to find the cash to build developments. Many are plagued by high vacancies in shopping parades that are impossible to let.
Stratford City is the only centre to open this year, and next year none will open. In 2008 a record 945,000 sq m of space opened – equivalent to more than six Bluewaters. But still hundreds of UK shops remain empty – often due to the undesirability of the area, or the shop not being the right size or style for modern retailers' requirements.
Stratford City may have achieved close to 97 per cent take up from retailers, but many of these held out as long as possible to negotiate better deals. Aurora brands such as Oasis and Swedish giant H&M weren't open at the big launch; holding out meant their stores weren't ready in time.
Despite demands for good deals, Gutman says: "We are in line with our budget in terms of the base rents." Westfield is now progressing with its next UK centres; an extension at Nottingham and a revised scheme in Bradford.
Sheila King, the director of group retail leasing at Hammerson, which owns regional centres across the UK, including Brent Cross in London, says: "Despite the challenging conditions we have still seen strong demand from retailers for space in prime shopping centres."
But if Stratford City becomes a success like its sister in Shepherd's Bush, will it be to the detriment of other areas? Will Ilford and Romford in Essex suffer? Or will it be Canary Wharf or regional Essex shopping centre Lakeside? Most experts believe Stratford will have an impact, but this will settle down once the novelty wears off.
Helen Dickinson, accountant KPMG's head of retail, says: "The key to Stratford's future will be how far people are prepared to travel when the fanfare of the new opening is over."
One casualty could be its existing neighbour – the Stratford Centre. Certainly it's downmarket, compared with the shiny new monster that has landed next door, but it may not be as badly affected as some think.
Think of the West 12 centre in Shepherd's Bush; it has happily traded in the shadow of Westfield London for the past three years. Its Morrison supermarket and other retailers attract the less wealthy in the area who can't afford Tiffany jewellery or drink at Westfield London's champagne bar.
Back at Stratford, Gutman thinks the centre's other assets will also be a draw. The scheme has 1.1m sq ft of offices, 1,200 homes to open after the Olympics, as well as hotels, a 14-screen Vue cinema, bowling alley and casino. It has created 18,000 permanent jobs and Westfield has invested in training schemes for applicants too.
Mary Portas, the Government's retail queen who has been hired to improve struggling town centres and high streets, was spotted at Westfield's VIP launch party. Her company does the public relations for Westfield and she is half way through compiling a report on how to reverse the demise of the high street.
The entire retail and property industry are waiting to see if she can do as good a PR job on the UK's high streets as she does for Westfield.Reuse content