Westfield Group has reassured investors it won't be burnt by the sub-prime mortgage meltdown, saying global demand for retail space is strong and sales still are up.
The world's largest shopping mall owner reported, in an investor briefing yesterday on its third quarter update, that its strategy of targeting affluent shoppers through its A$10 billion ($11.9 billion) future development programme, equipping malls for a higher quality shopping experience, should offer protection.
"Of course, we are probably not immune to fluctuation, but the reality is you have got to come back to what our business is - we are really focused on having the best shopping centres in the best markets," Westfield's joint managing director Steven Lowy said yesterday.
"These centres penetrate much more powerfully. You can see, out of the Australian and New Zealand business and with many US assets, where we have done that, we have been able to build centres that are a lot more immune to fluctuations.
"In slower times, they [retailers] keep the shops in the best centres and get rid of the more marginal shops. That is really what we have seen in the 47-year history of the company."
Westfield released figures yesterday showing occupancy levels at its malls across the globe remained above a tight 93 per cent in the third quarter and that leisure shops were doing the best in the weeks the credit crunch has taken hold, with retail growth levels of more than 14 per cent in both Australia and the United States.
Lowy said investors would have seen Westfield shift "not so suddenly" to developing and owning the best centres in the best markets.
"We have shifted our business in the United States to better quality assets," he said.
In Australia, Westfield's quarterly retail sales were up 5.6 per cent, in the UK, up 2.1 per cent, up 1.9 per cent in the US, and up 2.2 per cent in New Zealand.
Specialty store sales in the US had grown at 1.9 per cent in the three months, while in Australia, specialty store sales had grown at 7 per cent.
They were flat for the quarter in New Zealand, reflecting growing competition in Auckland.
"For the broader economic data coming out of the US, obviously, there are mixed signals regarding the strength of the economy," Lowy said. "[But] retail sales in the US and retail demand for space remains solid. Overall, on a sales per square foot basis, sales increased 4.4 per cent, from the same period last year."
Lowy said that, for the company's own portfolio, on a comparable basis, sales for the third quarter from the West Coast of the US were up 3.6 per cent, while the Mid-West and East Coast portfolios were flat.
"[In Australia], our shopping centre in Bondi Junction continues to power ahead from development completions, achieving current annual sales in excess of A$870 million at the end of September, with specialty store growth of 11.7 per cent for the nine months and 12.2 per cent for the quarter.
"The development of the mall in Chirnside, Brisbane, sees the centre now rank as the second highest grossing Westfield centre in the Australian portfolio for the September quarter.
Lowy said the retail sales slowdown was often not seen in retail rentals until nearly two years later.
"You need a long slowdown for it to affect rents," he said.
"We don't see any downward pressure on rents and would need a sustained slowdown to see one.