Department store giant David Jones will sell its six-storey menswear building in Melbourne’s Bourke Street Mall and use some of the $500 million in expected proceeds to pay for a facelift for its larger main store on the other side of the mall.
The 181-year-old retailer, like its competitor and Bourke Street neighbour Myer, has been buffeted by tough trading conditions and falling profits.
The Melbourne store revamp and sale strategy echoes similar moves in Sydney. As part of its “flagship city store” strategy, the group sold an similar building at 77 Market Street in Sydney and is undertaking a $200 million revamp of its main Elizabeth Street store, expected to open in March next year.
In Melbourne David Jones will offload a property at 299 Bourke Street on the south side of the mall which is nominated as a notable building and waiting to be listed on the state’s heritage register. There are also tight height limits in the heart of the Melbourne CBD retail precinct. Still the sale is expected to attract significant development interest and city agents estimated it could fetch around $530 million.
Bourke Street Mall, the city’s main pedestrian shopping thoroughfare, has some of Melbourne’s most sought-after retail real estate and is one of the city’s tightest held precincts – commanding correspondingly steep rents and prices.
As well as Myer and David Jones, it’s home to international retailers like Zara and H&M who are charged retail rents on par with Sydney’s Pitt Street Mall.
Ian Moir, chief executive of the South African-owned retailer, said the new-look refurbished store at 310 Bourke Street, on the mall’s north side, would be ready for shoppers in 2021 and would emphasise premium luxury and lifestyle brands.
It was partly upgraded during the construction of the Melbourne Emporium mega-mall when airwalks over Little Bourke Street were added and lifts, escalators and the beauty and luxury accessories hall were upgraded.
“The sale of 299 Bourke Street will allow us to deliver a more integrated retail experience to customers in Melbourne’s CBD,” he said.
“A single-store flagship housing the best local and international brands in one world-class destination will create a more seamless and cohesive experience for our customers.”
Funds from the sale will be applied in part to the refurbishment project and other areas of the business, he said.
Three years ago, the Myer family finalised a deal to sell its remaining one-third stake in the Myer Bourke Street store to funds manager TH Real Estate for more than $151 million. The 33 per cent share was the Myer family’s last remaining interest in the property.
Both Myer and David Jones have announced plans to downsize store formats and vacate unprofitable leases as they struggle against the online shopping tsunami.
Mr Moir pledged recently to get “more aggressive” in negotiations with landlords, aiming to reduce floor space 20 per cent by 2026 after the company’s profits nearly halved.
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