Unibail-Rodamco-Westfield, the owner of Westfield shopping centers, has made significant changes to its development plans due to the challenging retail environment in the UK. To combat the decrease in like-for-like net rental income of 4.2% experienced in 2019, the company has disposed of retail assets and scaled back its development pipeline.
In contrast to the UK, Continental Europe saw a growth of 3.1% in like-for-like net rental income, while the US experienced a 2.4% increase in comparable net operating income. Despite these challenges, Westfield saw positive indicators, with footfall and tenant sales outperforming the UK shopping center index and the national sales benchmark.
Footfall in Westfield centers increased by 2.8% in the year to December 31, and tenant sales grew by 4.7%. In Continental Europe, footfall increased by 2.6% and tenant sales saw significant growth of 5.2% and 5.5% at flagship destinations. However, in the US, tenant sales only increased by 1.6%.
To address the difficulties in the retail market, Unibail-Rodamco-Westfield has scaled back its development pipeline to €8.3 billion (£6.97bn), removing €3.2 billion (£2.6bn) worth of projects that no longer meet the group’s return on investment requirements. Additionally, the company has agreed to sell a 54.2% stake in a portfolio of five French centers to a consortium of French investors for €2 billion. These measures have raised €3.3 billion so far, bringing the total to €4.8 billion, or 80% of its €6 billion disposal target. These disposals are seen as crucial steps in the company’s strategy of concentration, differentiation, and innovation.
Despite the challenges, Unibail-Rodamco-Westfield remains confident in its five-year business plan. CEO Christophe Cuvillier affirmed that the group is well-positioned for the future and will continue to execute its strategy of concentration, differentiation, and innovation. The company will maintain a disciplined approach to capital allocation and deleveraging.
In conclusion, Unibail-Rodamco-Westfield has taken decisive actions to address the challenges faced in the UK retail environment. By disposing of assets and scaling back its development plans, the company aims to focus on concentration, differentiation, and innovation. Although the UK market has been challenging, positive results in footfall and tenant sales demonstrate the potential for success. With a confident outlook and strategic approach, Unibail-Rodamco-Westfield is poised to navigate the challenges and capitalize on opportunities in the global retail market.