The MD of Wesftield says it can withstand the slump.
Mall boss: Michael Gutman
V Michael Gutman, the managing director of Westfield UK and Europe shopping empire, can be forgiven for looking a little smug.
When the 53-year-old Australian launched London’s largest shopping mall last year amidst the worst economic slump in decades, sceptical onlookers predicted the project would fail. Today, close to 13 million customers have visited the £1.6 billion centre in Shepherd’s Bush, west London — an average of around 50,000 visitors a week. And Mr Gutman expects to exceed their annual target of 20 million customers.
He says: “People are coming. Habits have been established. We are establishing a new business in a new location at a difficult time and we are happy with the way things have started.” Information provider Caci ranked Westfield London as one of the British malls best placed to withstand the recession.
“London seems to be benefiting from the weaker pound and, thus, the rise in tourism,” explains Mr Gutman, who moved to the capital from Australia in 2003. “This, coupled with the fact that a lot of English people are choosing to holiday at home, has boosted retail sales in the capital. While the national picture has been subdued over the past few months, London sales increases have been encouraging.”
He adds: “The luxury shops are popular with the inbound market from the Middle East, China and Russia.
“We are seeing significant increases month-on-month on global refunds, which we are able to monitor in terms of what foreigners are spending.”
What does he make then of those who doubted the scheme? “Obviously we opened at a very difficult time, but we saw it as a one-off opportunity. It is a long-term project for us — not just for the period of this downturn.”
And Mr Gutman is bullish about the future. Louis Vuitton has recently joined the other 280 shops, and a 14-screen Vue cinema will be in place by the end of the year.
The group, which owns eight malls in the UK, is also pushing ahead with plans for a £681.5 million shopping centre in Stratford, east London, ahead of the 2012 Olympics. But then he does have the backing of one of the world’s wealthiest, and most successful, Jewish businessmen. The Australia-based Westfield group is owned by Frank Lowy, one of the richest people in Australia. Westfield own and operate shopping centres in Australia, New Zealand, the United States and the UK, valued in excess of £33.8bn.
But surely Westfield London has not escaped completely unharmed? “The first quarter of 2009 was quite a difficult trading period nationally and there were a few chains that did go into administration and bankruptcy, and we have been caught up in that.” He cites Mosaic, Michael Ziff’s Stylo Barratt Shoes Ltd and Whittard of Chelsea as examples. How many of the centre’s shops have been forced to close? Reluctant to give numbers, he says: “You can count them on one hand.
“In any new building that is built, you are always going to go through stabilisation issues, which have obviously been more pronounced at these times. But on the whole, I think we are comfortable with where we are sitting.”
The group has, however, come under fire recently over retailers’ service charges at the London mall. Tensions arose last November when the charges were increased to levels higher than were originally agreed in leases.
Westfield put its charges up from £8 to £14 per sq ft — about 50 per cent more than most other centres — but said it had always intended to review the charge. What exactly is the situation? “Earlier this year, we looked at the operating costs of all our UK malls and cut the costs by around 10 per cent in recognition of the challenging times.
“It was very difficult to do that with Westfield London because we have only been running for six months. It has taken some time to establish the right service level for that building.
“We are getting to the stage now where we can predict what the appropriate cost is, and we are close to finding an appropriate level. It will be pretty much in line with what retailers would expect to pay in other comparable centres in London.”
But wasn’t the issue that the charges got changed from what was in the lease? “When you do a project, you do a forecast of what you expect it to be and in the first year of operating, you give an actual figure and things have to be tendered and negotiated.”
Westfield listed on the Sydney Stock Exchange in 1960. It became active in the US in the late 1980s and entered the UK in 2000. Mr Gutman moved to Britain in 2003. He lives in Marylebone, near Oxford Street, which he describes as his “laboratory to study retail”. In fact, it was Marylebone High Street that served as an inspiration for Westfield London. “It was the combination of food and dining and the whole ambiance of the street.”
Westfield London in Numbers
● l1.6 sq ft
● l280 shops
● l4,500 cars
● l96 escalators
● l50 dining outlets
● l45 concierges speaking 14 languages
● l13,361 panels in the glass roof
● l4 train stations