Westfield owner says tenant sales still rising in H1

French shopping malls giant Unibail-Rodamco-Westfield said on Thursday that adjusted recurring earnings per share (AREPS) rose 6.6% to €5.28 in the first half as it reported general progress for the period, despite a US slowdown in fashion and luxury.

The company owns a raft of malls in Europe — including London’s two giant Westfield centres — and the US, and said its results were mainly driven by the strong operational performance in retail and offices, and supported by reduced general and financial expenses. 

As far as its operating performance goes, like-for-like net rental income (NRI) was up 8.2% at €1.152 billion. In its shopping centres, which made up the bulk of NRI at €1.059 billion, the figure rose 8.5% like-for-like. It was up 12.5% in continental Europe, and 9.4% in the UK, but was up only 1.4% for its US flagships. Meanwhile other US assets were down 9.8%.

The improved European performance was impacted positively by ‘indexation’ in continental Europe, where all rents are indexed on a yearly basis. It was also boosted by positive leasing activity.

TENANT SALES RISE

Importantly, the company said that tenant sales in the first half rose 9.2% year-on-year, including an 11.8% jump in continental Europe, a 6.8% rise in the UK and 4.6% in the US. Sales for its tenants continued to outperform overall footfall, “reflecting the productive nature of visitors” to its centres, although the UK saw sales lagging the footfall rise. Total footfall was up 7.3%, including an 8.2% rise in continental Europe, a 9.2% jump in the UK and a 2.7% uplift in the US. 

The company also said its shopping centres are being helped by a strong increase in the performance of social and experience-led activities, for instance with fitness-related tenant sales up 35.7%, entertainment up 22.4% and food & beverage up 17.1%. That said, health & beauty and fashion also continued to perform strongly, rising 17.7% and 9.7% respectively. 

In the US, flagship centres’ tenant sales were up 4.6% in H1, performing above the US National Sales index, which was up 4.3%. As in Europe, US flagships growth was also driven by the performance of experience-led sectors. But while health & beauty sales rose 9% there, fashion sales decreased by 2% and luxury dropped by 6.8%. However, both remained above 2019 levels.

URW added that rent collection amounted to 96% for H1 vs 96% and 95% initially reported in H1 2022 and in Q1 2023, respectively, both in Europe and in the US. 

Net of bankruptcies, H1 rent collection stood at 97% in Europe and for the group. URW also continued to collect 2022 rents, leading to an improvement of 2022 rent collection from 97% to 98%.

But bankruptcies increased in H1 to 211 stores, returning to a normalised level as government support and rent relief provided during the Covid period came to an end. More than a quarter of stores affected were in France. Some 84% of units affected saw their tenants still in place and 5% were re-let.

In terms of leasing activity, the group signed 1,180 leases. The proportion of long-term deals signed also increased.

Meanwhile, vacancies for shopping centres at group level decreased to 6.3% in H1 from 6.5% at FY 2022 and 6.9% at H1 2022. In continental Europe, the vacancy rate was at 3.6%, below the 3.8% in Q1 2023 due to good leasing activity, but up from 3.1% in December 2022. 

In the UK, vacancies decreased from 9.4% in December 2022 to 8.5% in June 2023 thanks to strong leasing activity. In the US, vacancies reduced to 9.9% in June 2023 from 10.4% in December 2022.