The developer of the £1.5bn flagship shopping centre of the 2012 London Olympic Games has signed up just three retailers out of 300 units less than two years before opening, laying bare the crisis gripping retail property.
The Australian property group Westfield confirmed yesterday that its anchors – Marks & Spencer, the department store John Lewis and its grocery chain Waitrose – are the only retailers committed to the scheme that opens in the first half of 2011, along with a Vue cinema. Anchor tenants typically receive hugely preferential terms, although Westfield declined to comment on them.
Industry sources said a key reason why Westfield Stratford is struggling to attract retailers, who are battling one of the worst downturns in living memory, is that they are "incredibly risk averse" about committing to future schemes. Some believe Westfield will have to offer hefty concessions, such as rent-free periods, or contributions to shopfitting fees to lure retailers through its doors.
One head of a large store group said: "I have not done anything with it [Stratford]. The marketplace has changed. If they think they are going to get people to sign up to traditional leases, they are in dreamland."
However, sources said that the location of Westfield Stratford, in one of the poorest areas of London, and the fact that the shopping centre still resembles a building site, are not helping. Furthermore, observers said that Westfield had alienated some retailers with its decision to increase service charge fees just days after its Westfield London scheme opened near Shepherds Bush last October. In June, Westfield agreed with retailers a net reduction in charges equivalent to about £1.4m when compared to estimates provided around Christmas 2008.
Westfield yesterday vehemently denied it was behind schedule in attracting tenants to Stratford. John Burton, Westfield's director of the Stratford project, said: "We have only really taken our first major steps in terms of actively engaging with retailers over the past few months and it is a long process. We are working hard to consummate a lot of deals now and we are confident we will be able to do a lot of deals before the end of the year." He added: "To say we are in poor shape is quite wide of the mark."
However, while shopping centre projects nearly always experience a "sprint finish" of retailers signing up closer to the opening date, retailers and property sources said that Westfield must be concerned about the low take-up of tenants. A number of retailers had signed up more than two years ahead of Westfield London's opening. Mr Burton insisted that the profile of the anchor tenants and the prospect of the Olympics, as well as the site beginning to resemble a shopping centre rather than a building site, would prove a major draw for retailers ahead of its opening deadline in 2011.
He expects the dearth of new shopping centres coming on stream elsewhere in the UK would also draw them in. "There is a scarcity of development pipelines for retailers," said Mr Burton. "After Stratford, there will be no major developments for four to five years." In fact, Westfield has stopped building on a shopping centre slated for Bradford. This year, it announced that it would not be starting any new projects in 2009.
The next major shopping centre scheme to open in the UK is St David's 2 in Cardiff. The centre, a scheme involving the property giant Land Securities, has found tenants for 62 per cent of the centre's space. A Land Securities spokesman said: "It will have the biggest John Lewis outside London and it will change the retail landscape in Wales."
James Moore: Shoppers stroll through Westfield – but are they spending?
Westfield London was intended to be a retail temple – a concrete and glass behemoth that would bring all the British consumer's most cherished brands together under one roof.
Still very new, it now looks horribly dated, an idea conceived in a boom that opened right in the middle of a bust.
Even in its early days, shoppers seemed to be thin on the ground. Westfield denies this anecdotal impression and is talking a good game – 99 per cent of shop fronts were let when it opened, and occupancy is still in the "high nineties" despite the brutal conditions on the high street which has seen a new retailer going cap-in-hand to banks and investors every few weeks.
Westfield says 15 million people have been through the doors, and insists that it is on track to meet its target of 20 million visitors in the first year. But watching the shoppers while strolling through in the development's early days there was something noticeable: an unusually large number of them were not carrying bags. They had come to look, but not to spend.
On a recent midweek visit, there were people there – but it seemed unusually quiet. Not a bad place, in fact, for those who still like to shop but have an aversion to queues.
As one retailer with time on his hands to chat said: "It's not that there are no people here. But those that do come are spending less."
And this is in prosperous west London. Stratford, where Westfield East will attempt a second coming, is a very different environment. It already has a smaller mall, filled with cheaper shops than might be found in Westfield. With the exception of the Sainsbury's Local, that doesn't feel very busy either.