David Jones considers development of flagship Sydney and Melbourne stores

Larry SchlesingerMarch 19, 2013

Department store giant David Jones may look to redevelop its flagship department stores in the Sydney and Melbourne CBDs as it reported a 13.5% decline in interim profits.

David Jones reported a company-wide profit after tax of $73.5 million for the six months to January 26 compared with $85 million in the same period in 2012.

Leasing and occupancy costs increased from $93.3 million in 2012 to $95.6 million in 2013 over the six month period.

“In 2012 independent property consultant Cushman & Wakefield concluded that the potential worth of the company’s Sydney and Melbourne flagship CBD store properties (on an existing use basis) was $612 million,” said David Jones in its half-year results announcement.

The flagship stores are the two Sydney stores on Elizabeth Street and Market Street in Sydney - the former being the very first David Jones store, which opened in 1927 - and the Melbourne store on Bourke Street Mall.

“The company is continuing to explore options to unlock the development value of these assets, whilst retaining ownership of its retail trading space.

“Priority has been given to the two Sydney sites as it felt these have the greatest potential.

“CB Richard Ellis has been appointed to advise the company on maximising the value of these assets.

“This remains a significant opportunity for the company however it is complex and will take time.”

The Australian Financial Review speculated this could mean adding "airspace" above its Sydney stores with "20 storeys to its Market Street store and perhaps five stories on Elizabeth Street where development is restricted because it could overshadow Hyde Park".

The extra storeys would be turned into hotels and apartments.

As part of interim results briefing, David Jones said it would continue to focus on its omni channel retailing (OCR) strategy, which includes emphasis on online sales.

Online sales increased 288% in the second quarter of 2013 following the launch of the David Jones web store in mid-2012.

David Jones chief executive Paul Zahra also highlighted that the company would examine its store portfolio in light of its broader omni channel retailing strategy and with six store leases in “less robust demographic locations:” set to expire in the next five years.

Stores in Bondi Junction and Canberra Centre will be refurbished over the next 12 months while the company will also focus on improving the productivity of stores with a target of lifting its average proportion of selling space compared to gross lettable area from a current 76% across the store portfolio to 85%.

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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