Westfield, the London shopping centre that opened amid fanfare six months ago, has backed down in a dispute with tenants over service charges amid signs that it is suffering in the economic downturn.

Europe’s biggest urban shopping mall was drawn into a dispute with 23 retailers over the charges it levied for shared facilities at the 43-acre centre in West London.

Michael Gutman, the managing director of the £1.6 billion centre, conceded that the charge would be adjusted. “Yes, there’ll be a reduction,” he said. “This is what we’ve been doing at our other seven buildings in the UK, where we recently reduced service charges by 10 per cent.”

Westfield had charged £14 per sq ft, about 50 per cent more than most other centres. The Australian Westfield company insisted that it had always intended to review the charge. Mr Gutman’s concession to retailers, including House of Fraser and Debenhams, comes as evidence mounts that the centre’s first six months have not been as successful as claimed.

Nearly 10 per cent of units were vacant, including restaurants and shops in its luxury village area, The Times found yesterday. Westfield, which said that the centre was nearly fully let when it opened last October, declined to give vacancy rates.

The luxury and restaurant areas were worst affected, casting doubt on Westfield’s strategy of bringing upmarket eateries and luxury retailers to a shopping centre for the first time. The luxury village had at least seven unoccupied stores yesterday afternoon. Westfield said that some tenants had been been lined up for vacant units.

Restaurants are thought to have been badly hit by the 14-screen cinema not yet being open, which has meant a lack of evening footfall. Vue is set to open the cinema towards the end of this year.

One retailer said: “We welcome the service charge move. It shows that Westfield is beginning to recognise the reality of the market.”

Mr Gutman said that no decision had been made on the size of the reduction on service charges. “We’re starting to get to the point now at Westfield, with six months under our belt, of understanding the trading patterns of the building and getting a much more precise view of what the service costs should be,” he was reported to have said.

Westfield opened amid speculation that it would hit trading in other West London shopping areas. Kensington High Street, one of affluent West London’s prime retail destinations, has suffered under the shadow of Westfield, according to statistics prepared for The Times by the Local Data Company. Vacant units in Kensington High Street have increased from 3 per cent to 5 per cent, the location researcher found. That is against a British average of 12 per cent, according to Local Data.

Whiteleys, an upmarket shopping centre in West London, has also suffered in the downturn. After the collapse of the company that ran its food hall, about 20 per cent of its units lie vacant. Standard Life, which runs Whiteleys, would not comment.

Martin Crossley, of King Sturge, a property consultancy, said: “The reality is that Westfield has failed to perform. It looks fully let – but talk to the retailers and they’ll say they’re on very good terms.”

Rent for prime spots at Westfield is thought to be about 30 per cent below Bluewater, Kent, despite Westfield’s upmarket credentials and lucrative catchment area.

Room for improvement

What to do with the vacant shop or office is fast becoming one of the burning questions of the recession.

Retailers and property companies have pleaded with the Government to reintroduce empty property relief on business rates. Instead the Department for Communities and Local Government suggested vacant premises should house art exhibitions and social enterprises.

The downturn has led not only to increasingly tense relationships between landlords and retailers but has also put strain on councils’ strategic plans as prime locations become available to comparatively downmarket tenants.

The Crown Estate, which manages property for The Queen, caused a furore when it refused to allow TK Maxx, the discount fashion retailer, to open a flagship store at the famous former Tower Records premises in Piccadilly in the West End of London.

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