Aug 1, 2019
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Unibail-Rodamco-Westfield rent income rises but UK weakness stands out

Aug 1, 2019

Global shopping malls giant Unibail-Rodamco-Westfield reported reasonably strong results on Thursday, given the tough markets out there, but its UK operations (the London-based Westfield malls) suffered from the same problems we heard about at rivals Hammerson and Intu this week.

Westfield London

Its UK rental income dropped in the six months to July 31 as vacancies rose due to the larger number of company voluntary arrangements (CVAs) and delays in leasing spaces due to Brexit issues.

But even in markets where net rental income (NRI) was a challenge, the company saw “very strong tenant sales growth in flagship destinations” with a 5.7% rise in Continental Europe, 7.1% in the UK, and 4.9% in the US.

Looking at the NRI percentage figures, on a like-for-like (LFL) basis, NRI was up 3.3% for the group overall, but the UK was actually down 3.1% compared to Continental Europe that rose 2.1% (with a 5.5% rise in flagships there). Total NRI in Continental Europe was up 12.2% with flagships rising even faster at 13.8%.

The fact that the two Westfield malls in London had a vacancy level of 8.7% due to “non-renewals” underlined the weakness in UK physical retail at the moment. URW’s properties are among the ‘supermalls’ in the UK, the spaces that are better able to compete and to attract the best tenants. If they’re suffering, it means less prestigious players are likely to be suffering even more.

While many companies fight shy of naming Brexit as a specific cause of its problems, URW wasn’t quite so reticent. “Brexit uncertainty deterring new tenants from entering the market” is an issue, it explained.

That said, the company did see a 6.4% increase in footfall in its UK shopping centres in the first half, and in that respect it outperformed the wider sector by 770 bps. It also said that in May and June its tenants saw a sales uplift of 7.9% and 7.1% respectively as the Westfield London extension made an impact and Westfield Stratford continued to grow.


Looking at the entire company, as mentioned, NRI was up 3.3% on a LFL basis, or almost 36% in total, to €1.254 billion. That total NRI surge was chiefly due to its acquisition of Westfield. 

The company called its results “solid”, when seems fair given that NRI in almost all its European markets was up in the first half. Apart from the UK, the Nordics was the only declining market. And the group said recurring net income rose to €916 million from €703 million.

Looking closer at Continental Europe, through June 30, URW tenant sales grew by 5.3% and by 5.7% in flagship centres. Through May 31, tenant sales increased by 4.9%, outperforming national sales indices by +242 bps. In France, tenant sales increased by 4.6% (+5.4% through June 30), outperforming the IFLS index by 270 bps and the CNCC index by 470 bps. 

Central Europe also did especially well, up by 4.6%, outperforming the national sales indices by 172 bps. In the Nordics, although URW’s own rental income suffered, tenant sales were up by 13.8%, boosted by the outstanding performance of Tesla in its two flagship stores in URW’s Stockholm centres.

In the US, tenant sales increased by 3% through June 30, of which 4.9% came from flagships. Speciality sales productivity per square foot (psf) increased by 11.3% (+12.8% for flagships). But at June 30, occupancy stood at only 93.4% (94.6% in flagships), 90 bps below June 30, 2018.

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