Thomas White Global Investing
London
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January 16, 2009
A Postcard from Europe
London :New London Shopping Malls Show No Fear of Slowdown

New London Shopping Malls

Despite the economic downturn, developers are building large shopping malls in London. Business is expected to pick up ahead of the 2012 Olympic Games in the city, mostly from foreign tourists who account for nearly half of the sales in some London malls even now.

Watching the thousands who thronged the new mall in the White City area in West London on opening day in October, it was hard to believe that the U.K. economy is in a recession. Built on a 43-acre plot of land, this new mega shopping mall covers an area of 1.6 million square feet. With space for as many as 265 stores and about 50 restaurants and cafes, Westfield London is the biggest inner-city shopping center in Europe. The central atrium is the size of a football field, and the roof is constructed with undulating glass, to let in the sun’s glow and warmth and minimize energy costs.

This $2.8 billion venture is as global as a brick and mortar shopping mall can possibly get. Appropriately so, as Westfield London is located in the exact location where the Franco-British Exhibition, the largest international public fair of its kind in Britain, was held a century before in 1908. Jointly owned by Australian mall developer Westfield and the property investment arm of Germany’s Commerzbank, the mall boasts retailers from 15 different countries. Its restaurants stand ready to serve food from 25 different regions across the globe to the more than 20 million shoppers expected every year.

Yet, it seems the mall could not have opened at a worse time. Though the huge crowd at the mall opening was impressive, weak economic conditions have evidently taken a heavy toll on consumer confidence. London is especially vulnerable, as the city’s celebrated financial services industry is reeling from the global financial crisis and big firms have laid off thousands of workers. Retail sales in London have been declining for months now and this holiday shopping season may have been the weakest in years for most retailers. Many large retailers, including the 99-year old Woolworths, are in deep financial trouble and some have filed for bankruptcy reorganization.

Then there is the famous British aversion to large shopping malls. Many Londoners prefer to shop in the small stores in crowded, but charming, shopping districts. Others fancy snapping up goods on the High Street, as the primary retail streets are called in Britain. Nonetheless, developers like Westfield are confident that the comfortable and secure environs of large malls will attract an increasing number of shoppers in the future. To attract more visitors, developers are positioning the malls as complete entertainment centers. Westfield London, for instance, has a 14-screen cinema and even a library.

Undaunted by the tough economic environment, mall developers and retailers remain optimistic about the long-term outlook and are building even more malls. Westfield hopes to open its Stratford City mall in East London by 2011, in time for the next Olympic Games in the city. The new mall under construction is the centerpiece of a large development and is designed to serve as a gateway to the Olympic Park at Stratford. To sustain business beyond the Games, retailers are banking on foreign visitors to London. Nearly half of all shoppers in older London malls are estimated to be foreign tourists and the new developments can attract a good number of them.

In the short-term, it would help if economic conditions do not worsen. For if they do, finance for the new developments will be delayed and the modest crowd of shoppers at the malls every weekend will thin down further. The developers are hopeful though, as they wait for an economic recovery which will bring back exuberant shoppers into their sprawling shopping paradises.

 

Image Credit: Jim Linwood under a Creative Commons License

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