Is the UK being served? Not at all, says Westfield

Westfield, the world's biggest owner of shopping malls, is betting it can lure British consumers from local stores with food courts, cinemas and covered parking as it expands in Europe's second-largest economy.

"We like the market because it's under-represented in terms of shopping-centre space," managing director Steven Lowy said. "Shoppers have been poorly served over a long time."

Westfield, which owns 129 malls in Australia, New Zealand, the US and Britain, has increased its British holdings more than fourfold to A$4.5 billion ($4.9 billion) since the start of 2004. It is the No 4 UK operator, with stakes in eight existing malls and three developments in construction.

Lowy, whose father Frank founded the company, said Westfield was tapping a market where shoppers had about 60 per cent less retail space per person than their US counterparts and 50 per cent less than Australians.

With about 90 malls to serve a population of 60 million, most British consumers still buy from individual stores in town centres.

"Property ownership is fragmented in the UK, and Westfield is leading the charge in terms of consolidating that," said Jason Teh, of Investors Mutual in Sydney. "It's all about shifting the balance of power from retailers to shopping-centre owners."

Westfield shares have risen 13 per cent since July 5, 2004, when the company merged with its Australian and US property trusts.

The company reported net income of A$832.9 million for the second half of 2004, without providing year-earlier figures.

In the US, where Westfield has 68 malls, Lowy said higher prices were capping expansion.

"We have made a decision in the past year to pass on opportunities and not be prepared to pay those prices," Lowy said. Britain provided "better market fundamentals and redevelopment opportunities".

Deborah Jackson, of New York-based Weiser Realty Advisers, said average returns on US shopping-mall purchases were declining as demand for the properties rose.

Even so, Westfield has not stopped expanding in the US, where it is the fourth-largest mall owner. On June 6, the company said it paid US$143 million ($200 million) for Sunrise Mall in Massapequa, New York.

The British market poses obstacles of its own. Nick Bubb, a retail analyst at Evolution Securities in London, said laws restricting shopping malls outside city centres might limit Westfield's opportunities.

"I don't think there's too much for people like Westfield to do," Bubb said. "The major prizes have already been won by people like Liberty." London-based Liberty International is Britain's No. 3 property company.

- BLOOMBERG