To stem the decline, the retail juggernaut has admitted it is dropping rents for new leases. In a rare admission, the group said reductions of up to 5 per cent were being negotiated.

But reductions were unlikely in the newer centres such as Westfield Sydney, where specialty rents on long leases remain at an average $15,660 per square metre.

Joint chief executive Steven Lowy told an investor briefing on Wednesday that while lease renewal rates were flat, the slowing economy, lower inflation and the continued rise in household savings rates had led to subdued market conditions.

''In Australia, while retail conditions have been subdued for most of the year, the business responded well and in January specialty retail sales were up about 4 per cent,'' Mr Lowy said.

''But this year lease renewals are basically flat and new leases were about 4 per cent to 5 per cent below leases at the previous expiries.''

In its full-year result, the group reported sales for its Australia and New Zealand malls were up 2.9 per cent on a comparable store basis. The forecast for 2013 was growth of 1.5 to 2 per cent, which was at the lower end of analyst expectations.

Weaker southern hemisphere business will be offset by improvement in US and British operations, as well as up to $550 million in developments earmarked for 2o13.

For the year to December 31, Westfield reported an 18.3 per cent rise in net profit to $1.72 billion.

The spinoff Westfield Retail Trust, which has a 50 per cent stake in the Australian and NZ shopping centres, reported a net profit of $830.8 million, slightly down on the $849.1 million a year earlier due to a fall in some property valuations.

Westfield Group will pay 49.5¢ in distributions per security, and expects that to rise to 51¢ in 2013. Investors in the Westfield Retail Trust will receive 18.75¢ per stapled security, rising to 19.85 in 2013.

Despite the cautious outlook, Westfield issued an earnings guidance growth of 3 per cent, equal to about 66.5¢ on a funds from operations calculation.

Mr Lowy said the redevelopment works at Miranda and Mount Gravatt in Australia, the opening of Westfield Stratford City in London last year, and Century City and Valley Fair in California, would underpin future earnings.

Co-chief executive Peter Lowy said the company expected 60 per cent of its income to come from the US and Britain in about four years, from about 55 per cent now, boosted by joint ventures in Milan and Brazil.

Analysts said the overall profit result was in line with expectations, but the outlook for the Australia/NZ portfolio continued to deteriorate, while the US portfolio was expected to deliver stronger net operating income growth in 2013 and beyond.

Simon Wheatley, head of real estate research at Goldman Sachs, said: ''We believe investors may be disappointed by another year of low funds from operations (FFO) growth.''