Oct. 30 (Bloomberg) -- London's largest shopping mall, a 265-store, glass-roofed center owned by Westfield Group and Commerzbank AG, opened today, just in time for Britain's first recession in 17 years.

``This building was built to withstand many cycles,'' said Steven Lowy, managing director of Sydney-based Westfield, in an interview on Bloomberg Television.``We're clearly in a difficult cycle today, but I think what stands out here is this building is almost fully let at over 99 percent.''

The 1.7 billion-pound ($2.8 billion) Westfield London mall in the White City section of the U.K. capital has tenants such as Marks & Spencer and House of Fraser and luxury retailers including Tiffany & Co. and Louis Vuitton, along with 47 restaurants and a 70-person concierge and valet staff.

The U.K. economy is entering its first recession since 1991 as the global financial crisis cuts access to credit, house prices fall and unemployment rises. Retailers are expecting a ``very challenging'' Christmas selling season, the Confederation of British Industry said this week.

The new building's opening also coincides with one of the worst commercial property slumps in history. The value of U.K retail properties fell 25 percent in the 16 months to Sept. 30, according to the Investment Property Databank Ltd.

``Our investment return has been set up for the long-term,'' said Lowy. ``I'm sure there'll be fluctuations along the way, but we are entirely confident that the long-term return of this shopping center will match our return expectations.''

Vacancy Rates

Westfield, the world's largest owner of shopping malls, is aiming for sales of 1 billion pounds and 20 million shoppers annually at its 1.6 million square feet (149,000 square meters) mall. It aims to draw customers to the west-central London site from affluent districts such as Notting Hill, Holland Park and Kensington.

Lowy said that he was ``of course'' concerned about shops becoming vacant as economic conditions worsen, though he added that the rate of U.S. shop vacancies is more volatile than in the U.K. He said that the U.S. had around 3 feet of retail space per head of population, compared with 1 foot in the U.K.

The company is building another mall in the city, next to the east London site of the 2012 Olympic Park. It's due to open in 2011. Lowy said the mall would ``absolutely'' open on schedule. ``We will open that in 2011. It's moving very well right now.''

New Space

This year is a record for U.K. shopping center development, with around 560,000 square meters of new space opening by its end, according to figures out today from property broker Cushman and Wakefield. Westfield London and the 151,000 square meters Liverpool One center, developed by fund managers Grosvenor and Henderson, account for half of that space, according to the report.

London, with a population of 7.5 million residents, has four regional shopping centers, with the new Westfield venture, while a comparably sized U.S. city would have 10, said Jonathan de Mello, the London-based director of the retail consultant group at Experian Plc.

Westfield London has ``been in the pipeline for seven years and it's in a good location,'' said de Mello, in an interview. Even so, economic conditions for retailers are ``dire,'' and the center will have to persuade most shoppers to travel by bus and the London Underground to reach the site, which also has 4,500 parking places.

The London Underground added a new station and upgraded others to serve the mall.

`Congestion Issues'

Nevertheless, ``there's going to be congestion and infrastructure issues,'' said de Mello. He also predicted that west London shopping districts in Kensington and Hammersmith will lose business, and that the mall will cost the city's West End shopping area 2 percent of sales.

The West End has 620 stores spread over 4 miles (6.4 kilometers), making it one of the largest retail areas in the world. It attracts 200 million shoppers a year, or about 10 times what's expected for Westfield London, and 5 billion pounds in spending.

Retailers in the West End district, which includes Oxford, Regent and Bond streets, don't expect to lose business to Westfield London, said Jace Tyrrell, a spokesman for the New West End Co., which oversees investment in the area.

``You can't compare the West End to a shopping center,'' Tyrrell said.

`Magnificent Australian Gamble'

Westfield London represents ``a magnificent Australian gamble,'' said Mike Slade, chief executive of Helical Bar, the U.K. developer which has applied to build 4.5 million square feet of homes and offices next to the mall.

In an interview two days ago, Slade said that big centers don't usually make money until they are established. ``But with the transport links and everything, it's a brilliant gamble.''

U.K. shoppers may not be in a gambling mood, after warnings in October from Prime Minister Gordon Brown and Bank of England governor Mervyn King that the economy, which shrank by 0.5 percent in the third quarter, is heading for a recession.

U.K. retail sales fell by 0.4 percent in September, according to the Office of National Statistics. Sales figures for the three months to Sep. 30 were 2.3 percent higher than a year ago, which was the lowest growth recorded since April 2006.

To contact the reporters on this story: Brian Lysaght in London at blysaght@bloomberg.net; Chris Bourke in London at cbourke4@bloomberg.net.

Last Updated: October 30, 2008 12:10 EDT